CAPITAL RETURNS OF CONDOMINIUMS IN THE EASTERN & WESTERN DISTRICTS

Abstract

High liquidity coupled with low interest rates and the often held view that prices of private residential properties will increase in the long term due to the scarcity of land in Singapore have prompted investors to purchase properties for investments. While the traditional prime districts of 9, 10 and 11 are the preferred choices for condominium investments, the Eastern and Western Districts have become increasingly popular. The aim of this study is to analyse and compare the capital returns of condominiums in the Eastern and Western Districts. The study further tests the hypothesis that the capital returns obtainable from properties in the two Districts are statistically similar. In this study, sale transactions of selected condominium projects in the Eastern and Western Districts are used to calculate the capital returns of condominiums based on characteristics such as location as represented by districts, the facilities provided in the development, the tenure and age of the condominiums and the floor areas of the units. A regression model is also established to test the hypothesis and to examine the relationships between the capital returns and the above mentioned micro factors. The study concludes that the capital returns of condominiums in the two districts are statistically indifferent. Age is found to have a negative impact on the returns of condominiums. Likewise, the size of a condominium unit also has a negative relationship with its returns. On the other hand, having full facilities and freehold tenure contributes to the greater returns of the condominiums. The results also show that the capital returns from the individual condominium projects are quite diverse. This indicates that investors should consider their condominium investments with great care in view of the wide variability in the capital returns achieved by individual condominium projects.