EVENT STUDY ON REZONED BUKIT TIMAH & HILLVIEW : IMPACT OF URA PLANNING MECHANISMS ON LAND VALUES

Abstract

The Urban Redevelopment Authority (URA) is the statutory body concerned with the physical planning of Singapore through the ongoing Development Guide Plans (DGPs) and the occasional policy changes. Being mandatory in nature, all URA policies thus have real and material impact on land values. One example of such a policy is the Rezoning exercise of Hillview and Bukit Timah. The objective of this study is to ascertain the effect of the URA policy on transacted land values and thereafter quantify the phenomena in these areas. Stock prices of publicly-listed companies which own industrially-converted landbanks have been examined to test for Efficient Market Hypothesis (EMH) characteristics. The findings of the Event Study via Average land values (ALVs) tests and Multiple Linear Regression {MLR) reaffirm the general understanding that the Rezoning had a significant effect on transacted land values. An estimated rise of 50% in Transacted average land values is observed while a 52.2% enhancement in Transacted land values is noted through the MLR analysis. Rational purchasers chased Cycle & Carriage's (C&C) and Rothman International's (Rothman) stocks in anticipation of the larger corporate profits emanating from the development or sale of their landbanks. The respective steep differential trading prices of 17% and 29% after the announcement indicates that the market is quick to impound such favourable information in these stock prices.