TO STUDY THE SUSTAINABILITY OF PRICE PREMIUM OF NEW HOUSING PROJECTS IN SINGAPORE

Abstract

There is a trend of widening gap between new sale and resale private residential properties in Singapore with new sale properties commanding a significant price premium over resale properties, this brings out a good topic for research on whether the price premium of new sale properties can be sustainable over time. However, the existence and sustainability of price premium on new sale properties are not widely discussed in past literatures. Therefore, this dissertation study aims to bridge the literature gap to investigate the existence and resilience of the price premium of new sale properties over time.

There are three stages for the investigation on new sale price premium in this study. Firstly, a short-run year-by-year hedonic regression model will be employed to test for the existence of new sale price premium from year 2000 to 2019 with a sample of freehold transactions in Novena. The short-run model shows that the correlation between age and property price and new sale and property price are statistically insignificant, implying that there are other factors that have a stronger correlation with property price. Secondly, a long-run hedonic regression model is used by combining the year-by-year sample to test for the existence of new price premium. Thirdly, a new sale age-to-price index and a resale age-to-price index are created for the comparison of the rate of change in property price between new sale and resale properties. The result is that the rate of decline for new sale property is greater than resale property which implies that the new sale price premium will diminish over time.

Therefore, this provides a good referencing point for property purchasers to make a wise choice between new sale and resale properties.