PROXIMITY EFFECT OF BUILD-TO-ORDER DEVELOPMENTS ON HDB RESALE PRICES IN MATURE ESTATES

Abstract

This dissertation empirically investigates the proximity effect of a BTO development on the resale prices of HDB flats located in the mature estates. The value of a residential unit attributes to its own characteristics, and from external stimulus such as environment and surrounding amenities. With several recent BTO developments involving mature estates due to HDB’s plans of town rejuvenation, it is important to realize the influence of new public housing in resale market prices. The hedonic pricing method is adopted in this study, and 3 specifications of the HPM has been tested using the transaction data of resale HDB flats in mature estates starting from April 2001 to end 2017. The models investigates if there is an impact on resale prices when there is a BTO development in the estate of the transaction property, and then analyzes the degree of resale price changes based on flat types, and distance between the BTO development and resale flat. The empirical results do not correspond to the theoretical prediction of house prices movements and found that resale prices increased when there is a presence of BTO development in the estate, and there is a lower percentage of price increase in resale flats for 3 and 4-room flats as there are more BTO flats as substitutes. Lastly, the percentage increase in resale prices lowers as the distance between BTO and resale decreases. In conclusion, BTO developments have likely brought about positive externalities which gave rise to the price increase in resale flats. However, this increase will be reduced when the BTO flat is able to substitute the resale flat.