INITIAL YIELD ANALYSIS FOR PRIME RESIDENTIAL PROPERTY MARKET IN SINGAPORE

Abstract

This study focuses on the ex-post analyses of the initial yield of private residential properties in prime districts of Singapore from 1995 to 2002. The initial yield conceals estimates of expected rental growth and risk premium. However, there is no precise technique as to the determination of the qualitative factors driving the initial yield. In the study, the yields of these prime districts' properties are decomposed into important parameters affecting property values. Market evidence shows that there is a negative relationship between yield changes and the price variations whereas the yield changes are positively related to the rental variations. The yield changes are also more sensitive to the rental variations. Decomposing initial yield into parameters, it is found that the yield is decreasing with time and developments with full-condo facilities reduce the initial yield. All market variables are negatively correlated to the initial yield with the highest correlation found for All-share Index. Currently, initial yield figures are commonly used in research or investment reports. The trend and correlation analyses between the initial yield and both locational and market variables can provide good measures for estimations of initial yields and evaluation of investment properties.