LEADING INDICATORS OF THE SINGAPORE REAL ESTATE MARKET

Abstract

This dissertation aims to find out which property submarket is a leading indicator of the real estate market, a leading indicator enables real estate market participants to be able to able to forecast directional changes to the real estate industry. Local property consultants have come to a consensus that the prices of Good Class Bungalows (GCBs) are the leading indicator of the real estate market. The statistical data spans from 1982-2005 on a quarterly basis. Prices for detached housing are found to be highly correlated to prices of GCBs with a correlation of 0.92. Hence, it is used as a substitute for prices of GCBs as price data for GCBs before 1990 were unavailable. Granger Causality tests find that terrace housing prices leads all other property submarkets. Multiple regression show that employment rate is the most significant as a 1% increase in employment rate will bring about an increase of 10% in terrace housing prices. Other significant variables includes, local stock market returns, lagged period terrace prices, real GDP growth and foreign stock market returns. Insignificant variables include real oil prices, construction costs and T-Bills. This dissertation concludes that although detached housing prices are a good indicator, it is terrace housing prices that form a better indicator than detached housing prices.