Housing Market in Singapore

Paper Session

Friday, Jan. 6, 2017 8:00 AM – 10:00 AM

Sheraton Grand Chicago, Huron
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Yongheng Deng, National University of Singapore

Flippers' sales and market mis-pricing: evidences from the Singapore private housing market

Yong Tu
,
National University of Singapore
Yanjiang Zhang
,
National University of Singapore
Yongheng Deng
,
National University of Singapore

Abstract

This paper defines housing flippers as home buyers and sellers whose trading is motivated by the capital gains accumulated within a short time period. Non-flippers are rental housing investors and owner occupiers. We attempt to offer an alternative explanation to housing market mis-pricing by scrutinizing their differential trading abilities and analyzing the positive feedbacks of non-flippers triggered by flippers' sale volume and selling premiums. We empirically prove that housing flippers have the highest trading ability in terms of buying low and selling high and are able to induce the positive feedbacks of rental housing investors and owner occupiers who represent the majority of housing market participants, which eventually lead to housing market mis-pricing. Our findings question the validity of the literature interpretation on the roles of informed flippers in smoothing housing market through additional supply during uptrend or booming periods. The findings imply that transaction taxes, such as the stamp duties targeted at flippers, should be a long run policy in order to stabilize long run housing market dynamics; and owner occupiers, who dominate a housing market, should also be properly restricted to curb an over-heated housing market while at the same time avoid malfunctioning housing market.

The Impact of the Cost of Car Ownership on the Housing Price Gradient in Singapore

Amanda Ross
,
West Virginia University
Naqun Huang
,
Singapore Management University
Jing Li
,
Singapore Management University

Abstract

We examine the relationship between the price of a car and the price of housing relative to distance from the central business district (CBD). Theory suggests that as transportation costs increase, the price of housing near the city center will increase. However, changes in house prices throughout the city and transportation costs may be simultaneously affected by unobservable variables. To address this concern, we draw upon data from Singapore, which has a unique feature in its car registration process. The Singapore government requires all cars to have a Certificate of Entitlement (COE), which is a significant portion of the costs of owning a car. However, there are a limited number of COEs available, based primarily reducing congestion, and are allocated through a competitive bidding process. We use the number of COEs allocated in a given period as an instrument for the price of a COE, as the number of COEs available is likely to be correlated with the price of the COE but uncorrelated with the price of housing. We find that when the price of a COE is higher, the price of housing closer to the city center is higher, suggesting that higher car prices cause individuals to increase their willingness to pay to locate closer to the city center. Our results provide empirical support of the housing price gradient with respect to transportation costs.

Social Network, Conspicuous Consumption, and Indebtedness

Masaki Mori
,
National University of Singapore
Kwan Ok Lee
,
National University of Singapore
Wenlan Qian
,
National University of Singapore

Abstract

Using a novel, large dataset of consumer transactions in Singapore, we study how conspicuous consumption affects household indebtedness. The coexistence of private housing (condominiums) and subsidized public housing (HDB) allows us to identify conspicuous consumers. Conditional on the same income and other socioeconomic characteristics, those who choose to reside in condominiums—considered a status good—are likely to be more conspicuous than their counterparts living in HDB units. We consistently find that condominium residents spend considerably more (by up to 44%) on conspicuous goods but not differently on inconspicuous goods. Compared with their matched HDB counterparts, more conspicuous consumers have 13% more credit card debt and 151% more delinquent credit card debt. Furthermore, the association between conspicuous consumption and credit card debt is concentrated among younger, male, single individuals. These results suggest that status-seeking-induced conspicuous consumption is an important determinant of household indebtedness.

Price of Ethnic Affinity in Housing Choice: Evidence From Public Resale Housing Market in Singapore

Sumit Agarwal
,
National University of Singapore
Tien Foo Sing
,
National University of Singapore
Hyun-Soo Choi
,
Singapore Management University
Jia He
,
National University of Singapore

Abstract

This paper aims to investigate effects of cultural amenities and social interaction on households’ residential location choice using Singapore public housing market data. Singapore public housing market has a unique institutional feature in resale transaction. Based on the Cash-Over-Valuation (COV) data, which measures the differences between final transaction price and valuation price for public housing transactions, for 73,048 transactions from 2007 to 2012, we test cultural affinity value in Singapore public housing market. We measure the presence of ethnicity group by the fraction of ethnicity population in each building and use the ethnicity quota as an indicator of having high concentration of a certain ethnicity group in the building that set a binding constraint on an affected ethnicity group from selling their houses to non-quota-binding ethnicity group by Singapore government. We find that COV per square meter significantly increases with the fraction of buyer’s ethnicity in a building. To live in a building with above 90th percentile of own ethnicity presence, Chinese or Malay buyers are paying additional SGD 100 as a COV per square meter. This is about 2.4% of overall transaction price. We also find that this effect only appears in own ethnicity quota building but not in other ethnicity quota buildings. Chinese buyers pay SGD 43 more as COV per square meter for the blocks with Chinese quota but pay SGD 11.24 less for the blocks with Malay quota and pay SGD 42 less for the blocks with Indian quota. These results are statistically significant. This additional COV paid by buyer shows the preference of location by certain ethnicity group due to the cultural value around the buildings.
Discussant(s)
Wenlan Qian
,
National University of Singapore
Shanjun Li
,
Cornell University
Chang Cheng Song
,
National University of Singapore
Gary Painter
,
University of Southern California
JEL Classifications
  • G1 - General Financial Markets
  • R2 - Household Analysis