Bubbles Are Departures from Equilibrium Housing Markets: Evidence from Singapore and Taiwan.
The housing prices in many Asian cities have grown rapidly since mid-2000s, leading to many reports of bubbles. However, such reports remain controversial as there is no widely accepted definition for a housing bubble. Previous studies have focused on indices, or assumed that home prices are lognomally distributed. Recently, Ohnishi et al. showed that the tail-end of the distribution of (Japan/Tokyo) becomes fatter during years where bubbles are suspected, but stop short of using this feature as a rigorous definition of a housing bubble. In this study, we look at housing transactions for Singapore (1995 to 2014) and Taiwan (2012 to 2014), and found strong evidence that the equilibrium home price distribution is a decaying exponential crossing over to a power law, after accounting for different housing types. We found positive deviations from the equilibrium distributions in Singapore condominiums and Zhu Zhai Da Lou in the Greater Taipei Area. These positive deviations are dragon kings, which thus provide us with an unambiguous and quantitative definition of housing bubbles. Also, the spatial-temporal dynamics show that bubble in Singapore is driven by price pulses in two investment districts. This finding provides a valuable insight for policymakers on implementation and evaluation of cooling measures.
Division of Physics and Applied Physics, School of Physical and Mathematical Sciences, Nanyang Technological University, 21 Nanyang Link, Singapore 637371, Republic of Singapore.|Complexity Institute, Nanyang Technological University, Block 2 Innovation Centre, Level 2 Unit 245, 18 Nanyang Drive, Singapore 637723, Republic of Singapore.
Darrell Jiajie
http://orcid.org/0000-0002-1423-7557
DJ
Tay
Department of Optoelectric Physics, Chinese Cultural University, 55 Hwa-Kang Road, Yang-Ming-Shan, Taipei 11114, Taiwan.
Chung-I
CI
Chou
Institute of Physics, Academia Sinica, 128 Section 2, Academia Road, Nankang, Taipei 11529, Taiwan.
Sai-Ping
SP
Li
Division of Physics and Applied Physics, School of Physical and Mathematical Sciences, Nanyang Technological University, 21 Nanyang Link, Singapore 637371, Republic of Singapore.
Shang You
SY
Tee
Division of Physics and Applied Physics, School of Physical and Mathematical Sciences, Nanyang Technological University, 21 Nanyang Link, Singapore 637371, Republic of Singapore.|Complexity Institute, Nanyang Technological University, Block 2 Innovation Centre, Level 2 Unit 245, 18 Nanyang Drive, Singapore 637723, Republic of Singapore.
Siew Ann
SA
Cheong
D006798:Housing / Q000191:economics*; D012846:Singapore; D062211:Spatio-Temporal Analysis; D013223:Statistics as Topic; D013624:Taiwan