REVISITING BALA �S TABLE: THE EFFECT OF LEASEHOLD DISCOUNTS FOR PUBLIC & PRIVATE HOUSING UNITS

Abstract

The urgency in addressing lease decay of residential properties in Singapore grows more significantly with each passing day in light of contemporary challenges such as an ageing population and land-scarcity while the state balances the agenda of homeownership. Bearing this in mind, this study investigates the impact of remaining lease term on housing values, and ascertains an empirical estimation of its economic impact on resale transaction prices for both the public and private housing sectors. This necessitated a quantitative approach with the use of hedonic regression models and descriptive statistics. The regression results established a statistically-significant positive relationship between remaining lease term and transaction prices for both HDB resale units and private non- landed residential resale units. While empirical research literature has established the presence of leasehold discounts across varying lease terms, a concept that is consistent with economic theory, there continues to be a lack of comprehensive study for Singapore’s context. Hedonic regression models were used to isolate the effects of lease decay, leading to results which provide statistical evidence for a positive relationship between remaining lease balance and housing value for HDB resale units and private non-landed residential resale units, for 79,088 and 17,056 transactions respectively.