QUALIFYING CERTIFICATE AND ITS IMPACT ON PROPERTY PRICES AND MARKET

Abstract

This paper examines the binding effects of the Qualifying Certificate scheme on the Singapore housing market. The policy stipulates that all housing units of private land developments owned by foreign developers have to be sold within two years after TOP date. A failure to do so will require a penalty of extension fees. This regulation aims to discourage speculation. However, observing that developers are either paying extension fees or bypassing the regulations, it is hypothesised that the Qualifying Certificate has no binding effect on transaction volume and housing prices. However, results have shown otherwise. Graphical analysis highlights two main spikes in transaction volume during the two-year time period. The spikes were detected during the first two quarters of TOP date and after the sixth quarter from TOP date. Likewise, regression results indicate a 3.2% drop in housing price of affected developments after the sixth quarter from TOP date, as compared to unaffected developments. Furthermore, an extension of the main study shows that the drop in housing prices are also detectable during the first two quarters of TOP date. This implies that developers are bound by the effects of the time requisites for sale, as they cut prices to clear their stock. In addition, heterogeneity tests revealed that the results are only consistent in developments located in the CCR and large-scale developments. This study provides new evidence of the search costs in Singapore private residential market and insights into the market clearing process.