GOVERNMENT POLICIES AND PRIVATE RESIDENTIAL PROPERTY PRICES IN SINGAPORE

Abstract

This study looks into the influence of government policies on the private residential property prices in Singapore. Quarterly data from the first quarter of 2000 to the third quarter of 2011 is used. Government policies that were implemented during this period, and other economic and real estate variables are identified in the study as variables of interest.

Variables of interest are treated and tested to ensure that they are stationary and do not hold unwanted correlation relationships. The Augmented Dickey Fuller test reveals the non-stationarity of certain variables of interest. A first-differenced Vector Autoregression (VAR) model is estimated to account for stationarity in the time series. The Breush Godfrey test for the resulting model affirms that the variables of interest are not serially correlated.

From the VAR model results, the variables in the VAR equation can explain close to 89.9% in the movements in the Private Property Price Index. The Prime Lending Rate and other public sector housing policies also appear to be significant in explaining the changes in the Private Property Price Index.

Lastly, the Granger Causality test was carried out to determine if there is a correlation between the value of one variable and the lags of other variables. It was found that policies which favour the purchase of property for consumers impact the Private Property Price Index the most, especially the reinstatement of the confirmed list for the government land sales. Hence, the timing and quantity of release of state land for the Government Land Sales programme is vital to ensure a stable residential property market.