Cooling Measures and Housing Wealth: Evidence from Singapore

TL;DR

This paper investigates how cooling measures in Singapore, implemented since 2009 to control house prices, have affected housing wealth distribution and welfare, revealing no consistent increase in welfare despite policy efforts.

Contribution

It provides the first empirical analysis of the distributional effects of housing cooling measures on welfare in Singapore.

Findings

Welfare from housing wealth may not have increased after 2009.

Welfare changes depend on the deflator used for real prices.

Welfare did not increase monotonically over the policy rounds.

Abstract

Excessive house price growth was at the heart of the financial crisis in 2007/08. Since then, many countries have added cooling measures to their regulatory frameworks. It has been found that these measures can indeed control price growth, but no one has examined whether this has adverse consequences for the housing wealth distribution. We examine this for Singapore, which started in 2009 to target price growth over ten rounds in total. We find that welfare from housing wealth in the last round might not be higher than before 2009. This depends on the deflator used to convert nominal into real prices. Irrespective of the deflator, we can reject that welfare increased monotonically over the different rounds.