DO HDB FLATS OFFER HIGHER YIELD THAN PRIVATE RESIDENTIAL PROPERTIES? (EMPIRICAL EVIDENCE FROM PASIR RIS PLANNING AREA)

Abstract

This paper studies Singapore’s HDB rental housing market in depth with empirical evidence from Pasir Ris planning area. It will focus on rental transactions in the open market instead of renting from HDB that is meant for lower income households. This study deviates from conventional focus on merely rental transaction and volume; it examines the rental yields which is currently under-explored, to conclude if HDB flats provides better returns than private residential properties. In particular, the objectives of this study are to understand the rent and price of the housing market in order to establish a theoretical framework to predict rental yield. This could justify the need for policy interventions to ensure stability and sustainability of HDB housing market. The first section of the research is conducted with analysis of rental and sale transactions to provide a snapshot of the current HDB housing market. Following on, four hedonic regression models were used to predict rents and purchase prices for HDB and private residential properties in order to derive rental yields for each property type. After which, comparisons of rental yields between HDB flats and private residential are made. The transactions data reveals that HDB rental yields range from 5.06-6.33%. Additionally, it is also found that 80% of the HDB flats’ tenants are dominated by foreigners. The regression results also reveal that HDB flats offer higher average rental yields ranging from 5.8-6.54%, approximately 2 to 3 times to that of private residential properties which ranges from 2.49-2.77% over the same period.