The softening in Singapore property prices would only have a relatively small impact on GDP growth, said Nomura in a report.
Nomura made its calculations through a vector auto-regression (VAR) framework, using five variables: GDP growth, PRPPI, private consumption, residential investment, and interest rates. VAR models are commonly used in housing studies in other advanced economies, the bank said.
Based on its calculations, Nomura believes that declines in property prices, in and of themselves, inflict limited damage to economic growth in the short term.
However declines in property prices could become more significant in the current context of an increasingly fragile economic outlook, high domestic debt, and slowing potential GDP growth.