Housing Affordability and Upward Mobility from Public to Private Housing in Singapore

Abstract

This paper examines the ability of buyers to afford and upgrade to private housing using the experience in land scarce Singapore as a case study. The concepts of the “threshold buyer” and “threshold upgrader” are introduced to construct an operational inter-temporal model of affordability and upward mobility, taking into consideration income, mortgage rates, prices of public housing flats and the legislative/financing framework in Singapore. The theoretical private property price computed by the upward mobility model is the lower bound dictated by affordability and cash outlay considerations such that the buyer/upgrader is no better or worse off arising from changes in the relevant factors over time. The model is empirically tested to evaluate the theoretical underpinnings as well as the ability of the model to predict private property price. Finally, the paper examines the implications for housing ownership policy in a wider context.
 

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