WHY DO HOUSING PRICES INCREASE DURING PERIODS OF RISING MORTGAGE RATES?
CHIA LIYI NICHOLAS
CHIA LIYI NICHOLAS
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Abstract
This paper investigates why housing prices in Singapore increase the vast majority of the time after an increase in mortgage rates in the preceding quarter.
A VAR model was constructed to determine the relationship between property prices and other economic determinants in various property sectors. It was found that mortgage rates and stock prices were significant variables at the 95% significance level across the various sectors and had a negative and positive relationship with housing prices respectively. Other variables such as GDP per capita, population, inflation, and housing supply were generally not significant variables.
Granger Causality tests were performed to determine if there were variables that Granger-cause both mortgage rates and housing prices. It was found that stock prices Granger-cause both these variables and had a positive relationship with them, which could explain why housing prices increase even after an increase in mortgage rates.
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Real Estate, Lee Nai Jia, RE, 2013/2014 RE
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Date
2014-05-08
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Dissertation