Newly Established Hospitals and Residential Property Prices

Abstract

Hospitals are a type of semi-obnoxious facility as they bring both positive benefits and negative amenities for residents. Their impact on property prices are not able to be easily quantified. However, with the prevalence of hospitals, it is increasing necessary to quantify the impacts. The findings from this study shed light on the impact of hospital on property prices at three phases, namely after the hospital’s announcement, after its construction and after its completion. The paper studies the residential property values of Khoo Teck Puat Hospital, Raffles Hospital and Ng Teng Fong Hospital within the buffer radius of 500m and properties within 500m and 1km from the hospital. Hedonic regressions are carried out using difference-in-differences (DID) to quantify the impact of the hospital opening on property prices in the vicinity.

The regression analysis reveals that the announcement of the hospital decreases property prices within 1km and the prices remain low throughout the construction phase. However, after the hospital has been completed, property prices within 500m from the hospital enjoy a price premium as the inconvenience associated with the construction process has diminished and the benefits of living near to the hospital has become visible and is realised by the residents. Beyond 500m, there is the wearing out of positive externalities and the hospital has no effect on property prices between 500m and 1km from it. In the longer time frame, from before the planning of the hospital to the hospital’s operation, properties prices within 500m were not affected while the properties between 500m and 1km radius experienced a price decrease due to the hospital. Such a decrease could be attributed substantially to the decrease in price that resulted after the announcement of the hospital, with no price increase for those properties after the hospital’s completion.