There is no strong correlation between how the housing market performs in Singapore and business cycles in the country. Additionally, the housing market's impact on the domestic labour market is also limited, said the Monetary Authority of Singapore (MAS).
In its Macroeconomic Review, the central bank attempted to investigate the relationship between housing and business cycles in Singapore.
In comparing nine growth recession episodes identified for the Singapore economy, it found that the contribution of residential investment to overall growth in gross domestic product was "modest or countercyclical". The 1985 recession and the Asian Financial Crisis in the late 1990s were the exceptions.
A reason for this, MAS noted, was "the occasional use of public construction as a countercyclical stabilisation tool during periods of weak growth".
It also noted that cycles in the housing market have little impact on the workforce here.
"Singapore's construction workforce is generally able to adjust flexibly to changes in demand," it said, adding that foreign workers are laid off during a downturn. As housing sales and construction activity decline, foreign workers are laid off, "so there is no increase in resident unemployment in the housing sector".
Nomura published a report saying that a 10 per cent decline in property prices here would only result in a cumulative 0.6 percentage point drop in real GDP growth.
Source: Business Times