SPECULATION AND WINDFALL IN THE EN BLOC MARKET AND ITS SPILLOVER EFFECTS

Abstract

The en bloc market echoes the windfall dream of many Singaporeans. More than just a scheme for land recycling purpose, the en bloc sale unique to Singapore’s strata title landscape is more well-known among the average household investors as a game of lottery. To most, having their property go en bloc is akin to winning the lottery as they stand to gain up to millions in fortune. Spurred by windfall, it is postulated that homeowners of the property surrounding an en bloc sale will speculate and hope to put their property up for en bloc sale.

The paper sets out to examine the possible speculation and spillover effects on surrounding properties following an en bloc sale in the vicinity. A Difference-In-Difference approach is employed in this study.

While the author had hypothesised that speculation would be significant enough to cause an increase in prices of surrounding properties, the regression results show otherwise, whereby housing prices in the treatment group actually declined after an en bloc sale. However, it is observed that prominent sales do invoke more confidence and speculation among homeowners as they raise their hopes of their property going en bloc. This is reflected in the increase in resale prices of the properties in the treatment zones surrounding a prominent en bloc deal. Also, it is observed that the announcement of en bloc launches has no effect on the resale prices of the surrounding properties.