RISK AND RETURN OF CONDOMINIUMS IN SINGAPORE
KHOO ELAINE
KHOO ELAINE
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Abstract
In the recent years, increasing affluence among Singaporeans has led to a substantial
accumulation of wealth by individuals which, in turn, has translated into higher
aspirations for better life. As such, there has been a considerable change of mindset
among Singaporeans in that residential property is no longer viewed purely as a basic
necessity but also as an investment good. The growing number of Singaporeans buying a
second or even a third property is indicative of this trend.
The objectives of this research are to investigate the risk and returns characteristics of the
leasehold condominiums in the central region of Singapore and the relationship between
the tenure and the returns. The repeat sales method is adopted to compute the returns and
risk. Standard deviation and coefficient of variation are used to measure the risk
involved. A correlation analysis is performed to examine the relationship between the
tenure and the rates of return.
The study shows a down trend of the rates of return over the sample period. The results
contradict the conventional idea that high risk must be compensated by high returns. In
addition, the correlation results also show longer leases might not result in higher returns.
Intuitively, since leasehold properties are depreciating asset, returns should decrease as
the remaining tenure decreases. However, this is not the case for leasehold properties in
Singapore.
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Date
2002
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