A STUDY ON THE IMPACT OF THE GREEN MARK SCHEME ON HOUSING PRICES

Abstract

The number of sustainable and energy-efficient green buildings and the rating system of these buildings has both proliferated over the last decade (Kotchen, 2006). Likewise, the Green Mark Scheme was launched in 2005 in Singapore by BCA in a bid to introduce a benchmarking and rating system for green buildings in Singapore and aim to certify a minimum of 80% of Singapore’s building stock by year 2030 (BCA, 2014). At present, the number of green buildings in Singapore is estimated at about 27% of the country’s gross floor area (Siva, Hoppe & Jain, 2017). Many studies conducted have shown that green buildings certified by these rating systems often yield a “green price premium” as compared to conventional buildings. However, as the number of green buildings continue to proliferate and dominate our nation’s cityscape, the green price premium is expected to lessen between green and conventional buildings. This paper aims to study the existence and magnitude of green price premium for green residential properties certified by the BCA Green Mark Scheme relative to non-green residential properties.

The Hedonic Pricing Model was adopted as the methodology to study the impact of Green Mark Certification on residential property prices. Through this study, it was revealed that Green Mark certified private residential properties in Singapore command an average price premium of 2%. Findings also indicate that the price premium of GM-rated properties differ between resale and presale stages and between freehold and leasehold properties. The price premium for GM-rated properties largely arises in the resale stage at about 7.49% and 2.44% in the presale stage. Whereas, freehold GM-rated properties commands larger a price premium of 7.62% relative to freehold NGM-rated properties compared to 4.96% that leasehold GM-rated properties command relative to leasehold NGM-rated properties.

Empirical results also suggest that the green price premium that accompanies the different ranks of certification ranges from the highest green price premium of 12.2% for Platinum; GoldPlus records at 6.3% of green price premium; Gold records at 1.0% of green price premium and Certified records the lowest at 0.9% of green price premium. These empirical findings will be of interest to private residential property developers and various planning authorities.