DO GREEN RESIDENTIAL DEVELOPMENTS STILL YIELD A PRICE PREMIUM IN THE NEAR FUTURE

Abstract

With Singapore’s goal of greening 80% of its buildings, green buildings are expected to dominate the cityscape and become a mass commodity. Hence, with greater accessibility to green building, price premium is expected to narrow between green and non-green properties, leading to lesser incentives for the profit-driven developers. This dissertation aims to examine the existence of price premium between green and non-green residential property and across the 4 Green Mark certification rankings. In order to test for the hypothesis of a narrowing trend of green price premium over the years, a temporal study is conducted on the price premium from 2005 to 2016. Hedonic regressions reveal an average price premium of 2.7% for Green Mark certified residential property with differing premiums for different certification ranking. The price premiums for Green Mark Gold, GoldPlus and Platinum certified property are at 2%, 3.5% and 11% respectively. Importantly nevertheless, due to the fluctuating price premiums in the temporal study, the possibility of decreasing green price premium cannot be rejected. Indeed, the empirical results suggest that lower green price premiums are observed as the scheme matures and with more green building supply entering the market. To prevent further narrowing price premium and diminishing motivation for green buildings supply, demand-side incentives may be explored to create healthy green building demand. Aside from the incentives that have previously been implemented, the role of education and a conducive environment for green practices remain key in order to create a strong and sustainable green culture in Singapore.