Singapore: No Flat, No Child
Fertility decline is a key feature of the demographic transition in many prosperous East Asian and Southeast Asian countries. Despite various pro-natalist policy measures like baby bonuses and universal childcare, fertility rates have often remained stubbornly low. As a key social institution in modern societies, housing can potentially play a vital role in shaping fertility decisions, but its impact has largely remained unexamined.
This paper (No flat, no child in Singapore: Cointegration analysis of housing, income, and fertility by Kidjie Saguin) seeks to address this gap by empirically examining the relationship between housing prices and fertility rates in Singapore, a country with one of the lowest fertility rates in the region but also one of the largest public housing markets in the world. It uses resale prices of public flats to test whether the wealth formation from housing can potentially increase the likelihood of having more children.
Key Findings
The cointegration analysis confirms the prevalent "no flat, no child" belief among young Singaporeans. It finds a negative long-run effect: a unit increase in the resale prices of public flats reduces the total fertility rate (TFR) by 0.0036, statistically significant at 1%.
Income is also found to affect fertility, though the magnitude is very small negatively.
The variables in the error correction model are sensitive to disequilibrium.
Resale prices Granger cause the TFR both in the short and long run, and the effect is bidirectional.
Singapore Context
Singapore's fertility rate has declined rapidly since the 1960s, reaching below replacement levels by the mid-1970s. Despite the government adopting a pro-natalist approach since 1984 with various incentives, the TFR remains at an alarming level of 1.2.
Housing has long been used as a policy lever to shape fertility in Singapore. 81% of the population lives in public housing regulated by the Housing Development Board (HDB). The HDB resale market, estimated to be five times larger than the private market, has created a permanent source of wealth for public homeowners. Price fluctuations in this market affect household mobility decisions, making housing a potential instrument to influence fertility.
Data and Methods
The paper uses a cointegration analysis of annual data from 1990 to 2019, including the total fertility rate, HDB resale price index, and gross national income per capita. The HDB resale index captures the overall price movements of resale flats. GNI per capita is used to control for other sources of wealth. A vector error correction model is estimated, and short-run and long-run Granger causality effects are tested.
Discussion
The findings provide contrasting evidence to the positive "wealth effects" of home ownership on fertility in the US. The author suggests several possible explanations:
Housing price inflation may not generate wealth effects due to liquidity constraints, bequest motives, and limited access to loans.
Decisions to sell may be motivated more by social status than generating wealth.
Regulatory restrictions on resale (like the minimum occupation period) diminish wealth effects.
While the negative relationship could indicate rising childrearing costs for young homeowners, the author emphasizes the need for more micro-level survey data to corroborate the mechanisms.
Conclusion
The study confirms the belief underpinning Singapore's "no flat, no child" discourse. Policymakers need to seriously consider this housing-fertility link in crafting population policies. Pro-natalist measures may prove inadequate if housing affordability is not addressed. Suggested interventions include decoupling housing and marriage through rental subsidies for young singles.
While the cointegration analysis provides robust evidence, the author acknowledges limitations like the small number of observations and the use of GNI per capita as an imperfect wealth measure. Future research could incorporate micro survey data, extend the time series, and conduct comparative studies in other low-fertility East Asian contexts.