Nursing homes and its impact on private residential property prices

Abstract

Ageing is at the forefront of issues faced by Singapore today as it experiences an unprecedented shift in age structure in the coming years. In 2011, the Ministry of Health (MOH) commissioned a move to double the nursing home capacity by 2020, to cater for this demographic change. The growth of nursing homes will require careful planning considerations. Hence, this paper examines possible externalities of nursing homes and seeks to understand its effect on property prices. To examine the causal impact, the difference-in-differences (DID) and difference-in-difference-in-differences (DDD) approach are adopted, accounting for structural, spatial and temporal variations. Using private residential data published in the Real Estate Information System (REALIS) from January 1995 to December 2017, this paper utilises a local-polynomial-regression estimator and determines a cut-off boundary of 400 metres. This boundary will be set as the treatment zone to study the proximity effect. This study concludes that nursing homes have a negative impact on private residential properties, where the treatment group transacted at 1.17% discount after the commencement, as compared to 2.57% premium before the commencement. Results further prove that the size of nursing homes has differing impacts on housing transactions. The negative impact on properties within the treatment group with smaller nursing homes is approximately 40% lower, as compared to larger nursing homes (-0.72% vs -1.19%). This research further found that for every 1% increase in elderly within a town, properties within the treatment group transacted at 0.11% premium before the opening of a nursing home, and further increased to 0.15% after the opening. The time event study also shows a growing acceptance of nursing homes after 2 years from opening. Research findings provide important planning considerations as to where nursing homes should be built in the future, to minimise any negative impact on its surroundings.