SINGAPORE RESIDENTIAL PROPERTIES � HEDGING CAPABILITY AGAINST CORE AND HEALTH COST INFLATIONS

Abstract

The paper attempts to study if the nominal returns of residential properties in Singapore are able to hedge against core inflation as well as health cost inflation. Singapore, like many developed nations, is quickly experiencing ageing population mainly attributed to low fertility rate. Unique to Singapore, however, is the high homeownership rates among her citizens. As a large portion of most Singaporeans’ wealth is tied up in their homes, there needs to be strong justification to hold up the housing ideology. Returns from their homes over time to eventually be consumed for retirement may serve as such justification. To further its objectives, the study makes use statistical tools of regressions to find out the implied relationship between nominal housing returns and consumer price index (CPI) inflation, as well as said housing returns and health cost inflation. Variables are properly approximated via proxies approved by existing literature. Empirical evidences suggest that all types of residential properties in Singapore are good hedge against CPI inflation. However, the results against health care cost inflation are more mixed in nature, and largely inconclusive. To this end, the study ends up being more useful to general existing and potential homeowners in Singapore rather than its original intended audience of retiring citizens. Nonetheless, it ultimately sheds much needed light on otherwise scarcely studied field.