COLLECTIVE LAND SALES AND HOUSE PRICES

Abstract

Abstract

The collective sale land market is a unique feature in Singapore residential land supply. Initially created to stimulate redevelopment and urban renewal of aging private residential estates, it has fast escalated into a prominent feature in the investment sale market of Singapore. Leading investment analysts and experts have pointed out that the performance of the private residential investment land market is closely related to the overall economy and the housing market performance. Singapore’s collective sale land market scaled new heights in the bumper years of 2006 and 2007. In 2007, Capitaland made history for the biggest quantum paid for a residential site in Farrer Court through a collective sale at $1.34 billion, while the collective sale of Westwood Apartments registered the highest price per square foot per plot ratio (psf/ppr) of over $2500. This study attempts to explore in-depth the performance of this land market segment using disaggregated data pool of residential land transactions. A land price index (LPI) can provide for the tracking of land price movements using transacted land prices. The findings in this study showed that the prices of collective sales sites experienced strong growth and the constructed land price index pointed out that the land prices is more volatile than home prices, but move along the general trend of home price movements. The LPI was noted to share a strong positive relationship with home prices. Granger Causality tests conducted between land prices and home prices shows a unidirectional causality from home prices to land prices. This study also compared a “collective sales-only” LPI and another constructed LPI based on aggregate land sales transactions and found that prices movements could be muted by using an aggregate data pool of land transactions.