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Asymmetric Price Response to Supply: Evidence from Singapore Author: Edward Ng Start Page:
45 Abstract: Prices
in the Asian residential property markets have skyrocketed over the past
decade.
A high rate of economic growth is one of the major reasons for
the price spiral.
Most Asian residential property markets are, however,
concentrated and national in nature.
Maintaining an artificially high price level through coordination
amongst producers is not impossible and would be the natural choice of
oligopolistic behavior (Scherer and Ross, 1990).
This study examines price responses to changes in economic
determinants in Singapore.
The focus is on supply.
Cointegration and error-correction techniques are employed to
test if upward and downward adjustment speeds are similar.
The results verify the impact of GDP growth, but also show that
price response to the supply of housing units is significantly downward
rigid.
This is not inconsistent with the hypothesis of collusive price
setting by property developers.
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