IMPACT OF HOSPITALS ON SURROUNDING PRIVATE RESIDENTIAL PROPERTY PRICES

Abstract

In recent years, an increasing number of hospitals are being constructed to cater to the aging population of Singapore. Singapore residents view hospitals as bringing about both positive and negative externalities – extraordinary life-saving institutions, and semi-obnoxious facilities at the same time. The benefits of staying in close proximity to a hospital are the higher chances of survival in event of an emergency, as well as the increased accessibility to healthcare services. The inconveniences are related to downside risks such as traffic congestion, noise pollution and even increased risk of disease infection during an epidemic outbreak. This thesis is addressing this dual nature of hospitals as both amenities and dis-amenities, analysing the impact of hospitals on surrounding private residential prices. In Singapore’s context, past dissertations have attempted to analyse the influence of hospitals in the context of the public sector, but this is the first research that analyses the influence of hospital locations on private residential prices. To estimate the impact of hospitals, hedonic pricing models were carried out. A total of 20,582 private condominium and apartment transactions are exploiting, covering the entire year of 2017. This restriction in focus is necessary in order to have a cleaner identification, and to abstain from any complications that may arise due to variation in overall aggregate conditions. These issues will be discussed more in detail below. In this thesis, the results show that hospitals in general have a non-linear effect on property prices. A positive influence on prices is observed when there is no control for postal district. When postal district is included in the regression model, a contrasting negative result emerges. Further, from a technical perspective, when hospitals are broken down one-by-one, i.e. trying to uncover the effects of individual locations, the results are statistically insignificant due to multi-collinearity issues. Mitigation measures were then taken to solve the problem, and to properly identify the pricing effects by functional location-specific clusters. With the number of hospitals set to increase in the future, the results from this study will be relevant to parties both in the private and public sectors. These stakeholders should exercise caution with regards to planning residential developments in close proximity to hospitals as the price will be affected.