October 5, 2012

A/P Tilak Abeysinghe, Director of the Singapore Center for Applied and Policy Economics at the Department of Economics, NUS, has voiced insights regarding the high housing prices in Singapore. According to his survey on private and HDB property prices, actual housing prices have outpaced the fundamental trend price since mid-2006. In order to explain this phenomenon, some fundamental variables are introduced into the analysis. For example, demand and supply imbalances in a market like housing drive prices up or down. When house prices are rising fast, buyers may rush to buy fearing further increases in price. A/P Abeysinghe claims that  the cost of housing for a typical Singaporean usually depends on factors like mortgage leading rates, the property tax rate and expected appreciation of house prices. Based on the information mentioned above,he explains that there is a large gap driven by a build-up of morgage loan between actual and affordable prices. Thus, it is likely that curbing population growth, especially foreign workers, will slow down housing price inflation. However, this will be bound to drive up business costs, raise unemployment and lower economic growth.