DOES NURSING HOME IMPACT THE SURROUNDING RESIDENTIAL PRICES?

Abstract

This dissertation examines the externality effects of nursing homes on the value of HDB flats nearby. Specifically, three hypotheses were examined, namely the magnitude of the impact of nursing homes on nearby housing is dependent on: firstly, the distance between the nursing home and the home; secondly, the size of the nursing home, and thirdly, the proportion of elderly in a town. A hedonic pricing model is estimated using a sample of 4,794 HDB resale transactions between March 2012 and July 2017. The results show that the three variables had a statistically significant effect on home values. Pertaining to distance to a nursing home, it was found out that for every increase of 100 metres, there is a decrease of price by 0.69%. With respect to the size of nursing home, for every increase in 100 square metres, a price discount of 0.00135% was seen in surrounding housing. Furthermore, results showed that a larger proportion of elderly residents led to a higher price discount. These findings are consistent with the belief that nursing homes are viewed as a negative externality and consequently, influence property values negatively. With ageing population becoming an inevitable challenge, the results from this study is of importance to urban planners and policy makers. These parties should be cautious in the planning of nursing homes in housing estates, especially with reference to nursing homes, since such developments can affect housing prices.