EFFECT OF JOHOR �S HOUSING BOOM ON SINGAPORE'S HOUSING MARKET

Abstract

In recent years, the property development in Johor has been greatly accelerated by the fast development of its Southern Johor Economic Region, Iskandar Malaysia (IM). Since its inception in 2006, numerous foreign investors have been drawn to IM, and some mega projects built by foreign developers have changed the property market in Johor profoundly. As Singapore is closely linked to Johor, this study assumes Singapore and Johor’s housing market to be linked together, and the study aims to examine the impacts of Johor’s housing boom on Singapore's housing market. In this study, a quasi-experiment is designed to test the effects of Johor’s housing boom on Singapore’s housing prices. And Johor’s housing boom is greatly defined by two event shocks that happened in Johor, namely Q4 2015 and Q1 2017. In Q4 2015, the housing supply in Johor reached an all-time high of 182,393 units, and in Q1 2017 the change of housing stock in Johor reached highest to 5% for total housing stock and 52.72% for condominium respectively. Thus, both Q4 2015 and Q4 2017 are selected as the exogenous shocks for the designed “diff-in-diff” study, to test the effects of Johor’s housing boom on Singapore's housing prices. Based on the non-landed private housing transaction data from January 2013 to September 2019, the study found Johor’s housing boom has negative impacts on Singapore’s housing prices. In general, the study found that for housing units located at planning areas that are next to the cross-border, they experience a price discount of 7.97% after the first housing supply shock in Johor, however, the second housing stock shock in Q1 2017 has less significant impacts. Moreover, the supply shock has incurred an economic loss of S$ 40.37 million for Singapore using 7.97% as the negative capitalization rate. And when controlling the distance from the housing samples to the checkpoints, the impacts of the first housing supply shock become more significant. For housing units located within 7km from the checkpoints, they experience a negative housing discount rates of 7.39%, and for housing units located within 6km and 3km, the negative housing discount rates increase to 10.24% and 13.4% respectively. As such, the study can conclude, Johor’s housing boom has negative impacts on affected Singapore’s housing prices, and the impacts get larger for housing units located closer to Johor. Key Words: Johor’s Housing Boom, Negative capitalization effects, Difference-in-Differences