Foreign liquidity to real estate market: Ripple effect and housing price dynamics

Wen-Chi Liao, Daxuan Zhao, Li Ping Lim and Grace Khei Mie Wong
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Wen-Chi Liao: National University of Singapore, Singapore
Li Ping Lim: National University of Singapore, Singapore
Grace Khei Mie Wong: National University of Singapore, Singapore

Urban Studies, 2015, vol. 52, issue 1, 138-158

Abstract: Globalisation enables foreign liquidity to access local property markets. This paper depicts a strong connection between foreigners’ property acquisitions and regional housing price movements in Singapore. Testing structure breaks also illustrates a ripple effect of prices from the central city to suburbs. A structural vector autoregression incorporates these two observations. Impulse-response function and forecast-error variance decomposition show that central region’s foreign-liquidity shocks can greatly impact housing price growth in not only the central region but also the non-central region where foreign buyers are inactive. The ripple effect of prices plays an important role. Non-central region’s foreign-liquidity shocks, in contrast, have small effects on both regions. Impacts of foreign-liquidity shocks can reach the public-housing market, where foreigners’ participation is prohibited. The findings are useful to policy makers who consider regulations of foreign home buyers as an instrument to stabilise housing markets.

Keywords: housing price ripple effect; international real estate; Singapore; structural break; structural vector autoregression (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:52:y:2015:i:1:p:138-158

DOI: 10.1177/0042098014523687

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