GREEN PREMIUM: A COMPARISON BETWEEN RESIDENTIAL AND COMMERCIAL GREEN BUILDINGS

Abstract

The Building Construction Authority (BCA) Green Mark (GM) Scheme is one of many certifications that recognise green buildings for their efforts at sustainability. Since the introduction of these schemes, there has been evidence that green-labelled developments which qualify for these certifications enjoy a higher economic return than standard developments, in the form of rent or sale price (otherwise known as the “green price premium”). Recent studies have, however, challenged this by finding that green price premiums have started to cease. This has been attributed to the increase in supply of green- labelled buildings. To ascertain the true state of affairs in Singapore, this study investigates the presence and magnitude of green price premiums across residential and commercial properties. Using the hedonic pricing model to study 34,269 transactions across 180 projects, the results reveal that green price premiums still exists among GM-Certified properties in Singapore. GM-Certified residential units were found to have a 4.76% price premium over their comparable NGM-Certified counterparts. Similarly, GM-Certified office and retail strata units had a price premium of 11.1% and 10.7% respectively. Comparing the prices of office units before and after they were retrofitted to become GM-Certified properties, findings show that only units awarded with the Platinum and Certified certificate yielded a price premium. In contrast, all retail units retrofitted to become GM-Certified saw a price premium regardless of their level of certificate. In view of these results, owners of residential and commercial units should be encouraged to innovate to reap the benefits brought by green-labelled properties.