UNDERSTANDING THE IMPACT OF MRT NETWORK ON THE HOUSING DYNAMICS IN SINGAPORE

Abstract

Using the transaction data of condominiums in Singapore from 1995 to 2011, this study applied a before and after hedonic price analysis with a control area to examine the impacts of the North East Line (NEL) MRT on condominium prices. The intervention area is defined as the 800 meter buffer zone of the NEL stations, while the control area is defined as the area between 800-1600 meter of a NEL station. The result showed that proximity to NEL stations actually reduces condominium prices. This may be due to the negative externalities brought about by NEL stations such as noise and crowdedness. In addition, condominium buyers are less dependent on public transport, so they benefit less from the NEL station. Although access benefits of the NEL were not capitalized into condominium prices, our results showed condominiums in the intervention area benefited from the speculation or imagination of future benefit of NEL before the NEL was in service in 2003. For example, in 1997, 2000, 2001 and 2003, properties in the intervention area is 4.0%, 12.0%, 7.0% and 7.8% higher than the control area respectively, all other factors being equal. The price appreciation in the intervention area before the launch of the NEL could be related to the milestone events such as announcement and construction of the NEL. However, from 2008 to 2011, our results have shown that the price premium of the control area compared to the intervention area is narrowing. This may be contributed by factors such as rising cost of ERP which increased the value of accessibility advantage offered by the MRT to condominium owners, which gradually capitalized into condominium prices.