IMPACT OF THE MRT ON THE SALES PRICES OF HDB SHOPS

Abstract

The primary socio-economic justification for the existence of a commercial entity is its ability to serve a customer group. The driving force behind all retail business is thus the existence of a clientele. The golden rule of location is therefore, albeit theoretically, the search for the optimum number of customers and amount of business. To achieve this objective, a retail store needs to be conveniently located. Many Housing and Development Board (HDB) shops are unlike retail stores in shopping centres in that instead of relying on tools like good tenant-mix, ambience and anchor tenants, they are very much dependent on the "occasional buyer" who happens to pass by. The inception of the Mass Rapid Transit (MRT) therefore brings a whole new dimension to retailing in HDB new towns. Properties located right at the doorway or in the vicinity of the MRT stations enjoy a higher degree of exposure and convenience. Hence these properties are said to be in prime locations and hence command higher premiums as compared to those which are not This study seeks to empirically examine the extent to which increased accessibility afforded by the MRT has translated into the sales prices of HDB shops under the Sale of Tenanted Shops Scheme. One-way Analysis of Variance and Multiple Regression Analysis are carried out to determine the impact of the MRT on such properties. Using Hougang and Ang Mo Kio for comparison and based on a sample of 152 HDB shops with first storey accommodation in the town centres of both estates, it was found that the mean sales prices per square metre (SPPSM) of HDB shops in estates with MRT differ significantly from those without. Therefore, empirical results show that the MRT has a significant impact on the sales prices of HDB shops on a macro level. The next layer of analysis determines the impact of the MRT on the SPPSM on a micro level. Using a multiple regression model, this study postulates that the sales prices of HDB shops can be explained by a few locational and physical characteristics. Results from the Regression Analysis reveal that 69% of the variation in SPPSM of HDB shops with first storey accommodation can be accounted for by the zone in which the shops are in, the proximity of the shops to the MRT station and the bus interchange and the floor area of the shops. MRT is found to be the most significant variable in the determination of sales prices of HDB shops with first storey accommodation. MRT alone accounts for 53% of the variation of the SPPSM. Empirical results show that for every increase of 200m from the nearest MRT station, the sales prices of such shops will fall by approximately $728psm.