A DISAGGREGATED APPROACH TO HOUSING AFFORDABILITY IN SINGAPORE

Abstract

Housing affordability is an important measure of welfare for policy-makers and households alike. In Singapore, it has recently become a contentious issue due to sharp spikes in both public and private housing prices.

A major problem is the lack of an adequate and accurate measure of housing affordability in Singapore. Hence, this dissertation aims to construct a representative measure of housing affordability that is appropriate for all income groups seeking housing within the two-tier housing sector in Singapore. It first surveys existing measures before creating a set of criteria for assessing them. The optimal model selected based on criteria such as comprehensibility, data availability, practicality, representativeness and effectiveness in targeted policy making is a disaggregated affordability model. It tracks the dynamics of housing affordability using a 10-year study period with 1999 as the base year. Unlike existing studies that focus on the mean or median, the key contribution of this study is that housing affordability is examined using the whole distribution of house prices and household incomes, divided into deciles.

The disaggregated affordability model reveals that property prices have actually outstripped household income at every decile group. The rising price-to-income ratios imply that fluctuations in property prices have resulted in the deterioration of affordability of public and private housing. Using an aggregated approach understated the housing affordability for households in the lowest 10% income group. These findings indicate that a disaggregated approach presents a more holistic and representative view of affordability across the entire population spectrum and should be used to guide policy making.

KEYWORDS: HOUSING AFFORDABILITY, DISAGGREGATED APPROACH, HOUSE PRICES, HOUSEHOLD INCOMES, DECILES