TY - JOUR
T1 - The price-rent dynamics and linkage of urban housing
T2 - evidence from Singapore
AU - Ji, Philip Inyeob
AU - Bogati Bhandari, Seema
N1 - Publisher Copyright:
© 2021, Emerald Publishing Limited.
PY - 2022/4/22
Y1 - 2022/4/22
N2 - Purpose: The aim of this paper is to examine dynamic linkages between price and rent and between property types. Intuition suggests that housing market segments experience different market cycles in response to macroeconomic shocks. However, they may be dynamically interlinked in urban areas because of substitutability. The linkage may even change, if preference weakens for multiple occupancies. A sudden reduction in apartment demand may create repercussions to other housing segments. Past analyses, despite their contributions, are static and do not consider possible linkages between property types. To fill this void, this paper investigates the price-rent dynamics for urban homes by adopting the case of Singapore. Design/methodology/approach: This paper applies a methodology from Phillips et al. (2015) to Singaporean housing (price and rent) data. Phillips et al. (2015) recently proposed a test for an explosive root in time series data and has spurred several empirical applications in the bubble literature. Findings: This paper finds for Singapore that the markets were subjected to explosive growth (where rents grew at a higher rate than prices did) during the Global Financial Crisis. Also, the results suggest that rent drives price and that non-landed housing (offices in central areas) leads to other residential housing (non-residential housing) in both price and rent. Practical implications: Overall, the present findings suggest that rent drives price, while property types are interlinked. Non-landed homes and offices in central areas are the sources of repercussions. Under normal circumstances, rental shocks may be propagated positively from nonlanded housing (central offices) to the other residential (non-residential) property types as the present findings suggest, which enables us to infer that a decrease in non-landed housing (central offices) rent may lead to an increase in rent on other property types because pandemic shocks only shift demand fromone property type to another, unlike typical macroeconomic shocks. Originality/value: Urban homes are faced with uncertainty arising from the COVID-19 outbreak for which city residents have a stronger incentive to exile to suburbs. Urban life may no longer be attractive because of social distancing and work from home policy. This has implications for urban home demands that are closely linked to urban house price and rent. In the present study, the paper set out to investigate the price-rent and property-type dynamics for urban homes in Singapore.
AB - Purpose: The aim of this paper is to examine dynamic linkages between price and rent and between property types. Intuition suggests that housing market segments experience different market cycles in response to macroeconomic shocks. However, they may be dynamically interlinked in urban areas because of substitutability. The linkage may even change, if preference weakens for multiple occupancies. A sudden reduction in apartment demand may create repercussions to other housing segments. Past analyses, despite their contributions, are static and do not consider possible linkages between property types. To fill this void, this paper investigates the price-rent dynamics for urban homes by adopting the case of Singapore. Design/methodology/approach: This paper applies a methodology from Phillips et al. (2015) to Singaporean housing (price and rent) data. Phillips et al. (2015) recently proposed a test for an explosive root in time series data and has spurred several empirical applications in the bubble literature. Findings: This paper finds for Singapore that the markets were subjected to explosive growth (where rents grew at a higher rate than prices did) during the Global Financial Crisis. Also, the results suggest that rent drives price and that non-landed housing (offices in central areas) leads to other residential housing (non-residential housing) in both price and rent. Practical implications: Overall, the present findings suggest that rent drives price, while property types are interlinked. Non-landed homes and offices in central areas are the sources of repercussions. Under normal circumstances, rental shocks may be propagated positively from nonlanded housing (central offices) to the other residential (non-residential) property types as the present findings suggest, which enables us to infer that a decrease in non-landed housing (central offices) rent may lead to an increase in rent on other property types because pandemic shocks only shift demand fromone property type to another, unlike typical macroeconomic shocks. Originality/value: Urban homes are faced with uncertainty arising from the COVID-19 outbreak for which city residents have a stronger incentive to exile to suburbs. Urban life may no longer be attractive because of social distancing and work from home policy. This has implications for urban home demands that are closely linked to urban house price and rent. In the present study, the paper set out to investigate the price-rent and property-type dynamics for urban homes in Singapore.
KW - Explosive roots
KW - Housing market analysis
KW - Housing markets
KW - Housing prices
KW - Law
KW - Macroeconomics
KW - Price-to-rent ratio
KW - Pricing model
KW - Rational bubbles
UR - http://www.scopus.com/inward/record.url?scp=85111903930&partnerID=8YFLogxK
U2 - 10.1108/IJHMA-02-2021-0023
DO - 10.1108/IJHMA-02-2021-0023
M3 - Article
AN - SCOPUS:85111903930
SN - 1753-8270
VL - 15
SP - 504
EP - 520
JO - International Journal of Housing Markets and Analysis
JF - International Journal of Housing Markets and Analysis
IS - 3
ER -