ANALYSIS OF RESALE PRICES IN THE HDB SALE OF TENANTED SHOPS SCHEME (SOTS)

Abstract

The difficulties encountered by local small and medium-sized retailers arising from changing consumer patterns and lifestyles and a more competitive business environment was highlighted by the Government in the "Retail Sector Development Plan" (RSDP) in March 1992. In wanting to give the shopkeepers more certainty and confidence to make long-term plans upgrade their business, the Sale of Tenanted Shops Scheme (SOTS) was introduced as a series of action plans under the RSDP. In the progress of the SOTS, many shopkeepers expressed concerns that high HDB shop prices may result in higher prices for goods, and a poorer mix of shops. If price trends continue, more shopkeepers may well be priced out of the neighbourhood. However, HDB shopkeepers are primarily businessmen not welfare cases. Any lowering of the sale price could lead to higher windfall gains for shopkeepers who could just cream off profits on the resale market with no productive work on their own. Unlike HDB flats, the HDB shops are of a commercial nature and should be sold at market rate. Hence, the need to ensure the market pricing of shops. The resale prices of shops are taken as reflective of the market potential of the shops as they are transacted in the open market. The dissertation therefore aims at presenting a constructive analysis for the market pricing of the shops offered for sale under the HDB's SOTS. Based on the results of the analysis, the sale price, the shop type, and the type of activity nodes were identified as significant factors that contribute to the pricing of HDB shops. The regression model is then used to explain the nature of relationship between the significant and the dependent variable - the resale price. As the model cannot replace a detailed valuation in the determination of the sale price, it is therefore recommended that a more rigorous and extensive valuation excretes be carried out to accommodate other factors such as different shop types.