Unveiling the mystery of “empty” buildings : a quantitative study of housing vacancy rates

• Main Authors: Goh, May Hui, Lim, Xin Hui, Toh, Eu Hao
• Other Authors: Tang Yang
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Social sciences::Economic theory
• Online Access: http://hdl.handle.net/10356/65553
• Institution: Nanyang Technological University

The theoretical relationship between housing price and housing vacancy rates is ambiguous. What causes housing vacancy rate to change? How does housing vacancy rate impact the housing prices? To address these questions, we develop a mathematical framework with solid micro foundation to study the determinants of housing vacancy rate. Our model incorporates features such as borrowing constraints, variation of home ownership preferences and heterogeneous income profiles. Our calibrated model successfully matches the historical housing vacancy rate in Singapore. Quantitative analysis shows that depreciation rates, initial rental and house price, market interest rate and house value appreciation rate affect housing vacancy rate differently. Results suggest that an increase in initial housing price accompanied with an increase in vacancy rates could signal the presence of a speculative housing bubble.