LOCAL PUBLIC GOODS AND THE PRICE OF RESIDENTIAL PROPERTIES

Abstract

This study investigates the relationship between local public goods and private non landed house prices in Singapore. As residential towns of different ages and development stages tend to have varying quantities and varieties of attractive local goods, this study further aims to ascertain whether amenity-proximate house premiums vary in towns of different age categories. The age categories are defined as mature, middle-aged, and young. The foundation of the study builds on the economic model of capitalisation that recognises home values to be deeply intertwined with neighbourhood amenities. Through the hedonic analysis of 55,143 home transactions, it is found that the positive or negative price impact a public good expends on home values does indeed depend on the age of a town, as well as its nature (whether it creates significant negative externalities or not), abundance, and quality. The age of a town impacts the demographic characteristics and preferences of its residents, which in turn impacts their differential demand for diverse local public goods. In general, recreational public goods (such as green amenities, sports complexes, and libraries) impact house prices negatively countrywide. However, the magnitude and direction of impact differ in towns of different age categories. In like manner, three other public goods (including schools, public hospitals, and air quality) analysed in this study exert similar differential impacts. Homes in middle-aged towns report the highest prices.Thus, middle-aged towns can be seen to be a more popular choice of residence by private homebuyers.