Housing Prices and the Credit Impulse: A Singaporean Analysis

According to latest reports on the Singapore property market, the number of private homes sold soared to a 14-month high in January 2012, indicating that housing demand remained buoyant, contrary to expectations of a slowdown in housing market activity due to the implementation of ABSD (additional buyer stamp duty) in December 2011. Indeed, ABSD appears to have had a muted effect on reining in demand for mass market properties, and recent launches such as the Watertown and the Hillier selling extremely well, and approx 90% of sales going to Singaporeans.

As to be expected, none of the articles published and none of the experts quoted have made any detailed analysis of the state of credit expansion as a facilitator or driver of housing demand and housing prices. Economist Steve Keen and other analysts have argued (see references below) that the real explanation for rising house prices is rising credit. To be more precise, what drives the change in house prices is the acceleration of mortgage debt. The acceleration of debt has been dubbed "the credit impulse" by Michael Biggs et al, and more recently termed the "credit accelerator" by Keen.