EFFECT OF FOREIGN DEMAND ON HOUSING PRICE ADJUSTMENT IN SINGAPORE NON-LANDED PRIVATE RESIDENTIAL PROPERTY MARKET

Abstract

This exploratory study investigates the effect of foreign demand on housing prices of Singapore non-landed property market. Such effect could be manifested in two ways: (1) Housing price reacts to change in foreign demand and (2) Housing price anticipates the change in foreign demand and self-adjusts even before the change in foreign demand comes about. Granger Causality Test and Autoregressive Distributed Lagged Model is constructed for empirical analysis. The empirical results prove that in Singapore non-landed market, foreign demand has a significant impact on housing price adjustment. At national level and in rest of central region, housing price tends to react to change in foreign demand. As the result, change in foreign demand Granger causes change in housing price and the coefficient between change is foreign demand and change in housing price (with lagged period) is statistically significant and positive. In core central region, where high concentration of foreign demand is observed, housing price tends to anticipate foreign demand and moves in tandem with expected change in foreign demand. Consequently, change in housing price Granger causes change in foreign demand, and the coefficient between change in local demand and change in housing price (with lagged period) is statistically significant and positive.