THE AGEING POPULATION AND ITS IMPACT ON PUBLIC HOUSING PRICES

Abstract

According to the life-cycle hypothesis (Ando and Modigliani, 1963), people purchase assets such as housing during the working age and monetise them in old age, suggesting that in an ageing society, the offloading of housings may result in imbalance in demand and supply. This study is motivated by the fact that Singapore, an ageing society, is believed to face more challenges as the country possesses a high homeownership rate and stringent regulations restricting ownership. This study analyses the ageing effect on public housing prices, establish which flat type will be affected the most and project price changes in the next 32 years. It is hypothesised that an increase in elderly proportions will decrease housing prices and 3-room to 5-room flats where most elderly are residing in will see negative price impacts which increase correspondingly to the flat type. Key explanatory variables such as total population and old-age dependency ratio are selected alongside other control variables for the hedonic pricing model. HDB resale transaction data and resident population numbers in four different years in five years interval from 2003 to 2018 were selected for analysis. The findings have shown that while a unit increase in total population numbers will result in 2.18% increase in housing prices, a percentage increase in old-age dependency ratio will result in 6.8% decrease in housing prices, translating into a net price decline of 4.62%. Furthermore, while price decline will be present for all flat types studied, 5-room flats are found to be faced with the greatest impact. In 2030, 2040 and 2050, it is projected that an average price decline of 4%, 6% and 7% will be observed across the country. As housing is a policy, spatial planning and asset tool, its market dynamics affect policymakers, urban planners and homeowners. Fundamentally, these price changes are founded upon existing regulations on the public housing market. Hence, this speaks of the importance for policymakers to review existing policies in anticipation of the ageing effect in ensuring price stability and planners to better project further housing demand and supply for effective land use allocation, potentially curbing an over-supply.