THE HOUSING MARKET EFFECT OF THE ANTI-SPECULATIVE MEASURES: EVIDENCE FROM SINGAPORE �S ABSD

Abstract

The Global Financial crisis has had profound repercussions on Singapore’s private residential market, with a dramatic increase in property prices in 2009. The rapid ascent in property prices has stimulated the interest of speculators and raised concerns about the potential risk of a housing bubble. As a result, a bundle of anti-speculative measures has been initiated by the Singaporean government to curb irrational market activities and ensure the sustainable growth of the housing market. However, it was not until the seventh round of anti-speculative measures (R7), which can be distinguished by its revised Additional Buyer Stamp Duty (ABSD), that positive signals of market stabilization were observed. Nevertheless, it is worth noting that R7’s effect on housing prices varies across locations and submarkets. The aim of this study is to provide a deeper understanding of R7’s impact on geographical patterns of private residential prices as well as its varying impact across submarkets. The main methodology applied in this paper is Regression Discontinuity (RD), which makes this study the first in Singapore to use RD to discover the direction and magnitude of R7’s impact across planning regions and submarkets. The results show that, while the R7 policy has triggered a 7.31% drop in housing prices in the central region, it did not have a statistically significant impact on the peripheral region. R7’s impacts also varied with property types/characteristics. This is evident given that shoebox units showed the greatest price drop at 5.23% while non-shoebox units did not show themselves to be significantly affected. A different order polynomial has also been applied to check for robustness. The findings indicate that the R7 policy has accomplished its goal of reducing housing prices and promoting genuine home purchases since it effectively drove up the costs of speculation activities such as owning multiple homes.