Negative Externality of Foreign Dormitories and Housing Value - Is there a change in perception of foreign workers in Singapore?

Abstract

Foreign Workers play a paramount role in Singapore’s economy, enabling the manufacturing, marine and construction industries to remain competitive and to keep up with Singapore’s rapid urbanization. By association, Foreign Dormitories should be considered an essential part of Singapore’s landscape, however, they are often found far away from residential neighborhoods. With Singapore’s limited land area, there is a growing need to house foreign workers closer to residential neighborhoods. The Covid-19 pandemic has put a spotlight on these foreign workers and dormitories, where the public has mixed attitudes towards them. This study investigates how housing prices of properties located within 1km of a foreign dormitory are impacted, if any through the employment of a Difference-in-Differences (DID) methodology in the hedonic pricing model. Additionally, a survey was also conducted amongst Singaporeans to better understand their perceptions of foreign workers in the wake of the pandemic, and to measure their willingness to reside close to the foreign dormitories. Research findings, through the difference-in-differences estimator yields insignificant results, establishing that the development of foreign dormitories within close proximity to public housing has no causal relationship with the public housing transaction prices. Together with the qualitative analysis from the survey and literature reviews, the study found that whilst perceptions towards foreign workers are shifting positively, Singaporeans are still unwilling to compromise on their housing choices and neighborhood environment. Most would still choose to avoid residing close to a dormitory, with 41.7% willing to pay a premium to reside further away. This indicates that these causal relationships may surface and become more pertinent over time if nothing is done to mitigate this issue.