Upward mobility, house price volatility, and housing equity

Traditional property price models fail to explain the large price swings observed in housing markets. Recent literature suggests that such phenomena are caused by changes in housing demand of credit/equity constrained households. We attempt to empirically test the equity constraint hypotheses by examining the households' characteristics and their ability to upgrade, using the Singapore residential market as a case study. Our empirical results support the equity constraint hypotheses; younger and credit constrained households are more likely to move when their ability to afford better housing is enhanced.