PRICE DISCOVERY & TIME ON THE MARKET: IMPACT OF LOCATIONAL FACTORS

Abstract

The immobility of real estate means that location is one of the most important considerations when purchasing properties. Extensive research has been done on analysis of locational effects on property values However studies on time on the market (TOM) have accounted for locational effects only by broad classification into large regions and areas. Specific location factors such as proximity to MRT stations, expressways and primary schools have been ignored. This study aims to verify the effects of these specific factors on home prices and more importantly, to make the first attempt to link these factors to TOM Besides location-specific factors, this study also examines the impact of a major public housing policy - the Main Upgrading Programme, on home prices and TOM. Using sales data from public housing in Singapore, it is shown that homes located near MRT stations fetch higher prices and have shorter TOM, while those located near expressways suffer from price discounts and have longer TOM. The study also finds homes listed during MUP works-in-progress have shorter TOM. Further analysis of the MUP impact implies weak evidence of MUP increasing property prices but strong evidence of MUP decreasing TOM Another interesting finding is that TOM will not be reduced if agents who are experienced do not exert high effort. In addition, sensitivity of TOM to the degree of above-market pricing and the resale returns is observed to increase with increasing distance from the Central Area and with increasing room-types.