IMPACT OF IMMIGRATION AND FOREIGN HOME OWNERSHIP ON SINGAPORE'S PRIVATE RESIDENTIAL PRICES

Abstract

In order to achieve its aspirations of becoming a leading global city, Singapore adopts a calibrated open immigration policy to attract foreign talent to boost the local economy, aiding the country in its transition into a knowledge-based economy. Although the influx of immigrants may bring about economic benefits, it may also exacerbate the housing unaffordability issue due to increased competition for housing in the land scarce nation. This study aims to study the long run and short run impacts that immigration and foreign ownership of housing has on the private residential prices in Singapore.

Eight variables including one dependent, two dependent and five control variables were selected after reviewing existing literature on housing price determinants. Firstly, the Augmented Dickey-Fuller test was first run to ensure the stationarity of time series. Six variables were found to be stationary at first difference, and the Johansen cointegration test was used to determine the presence of one cointegrating long run equation. Thereafter, the Error Correction Model was formulated to establish the short run relationship between the selected variables and private residential price index.

The findings from this study suggest that immigration and foreign ownership of housing have long run impacts on private residential prices. Immigration is found to drive private housing prices up in the long run, while the stock of units owned by foreigners is found to drive housing prices down. However, short run impacts were found to be insignificant. These results provide insights to the direction of government policies targeted at immigration and foreign ownership in order to ensure housing affordability.