THE EFFECT OF LAND USE DISTRIBUTION ON PRIVATE RESIDENTIAL PROPERTY VALUES

Abstract

The literature suggests that land use planning significantly affects residential satisfaction and wellbeing. This is particularly true for the case of Singapore that faces land scarcity and where land use distributions are determined mainly by urban planners. Unfortunately, we know little about how the distribution of different land uses in a given area has changed over time and how it has influenced residential satisfaction. This is the first study that documents land use changes between 2008 and 2014 in each neighbourhood (i.e. subzone) in Singapore by using land use data from Urban Redevelopment Authority and taking advantage of the Geographic Information System. Also, it significantly contributes to the literature by statistically estimating the relationships between land use distributions and house prices used as a proxy of residential satisfaction. Residential property transaction data are from the Real Estate Information System.

The analysis results report that a 1% increase in the percentage of residential lands in a neighbourhood is associated with the 19.4% reduction in the transacted price of the private residential properties. On the other hand, the percentage of commercial lands has a positive relationship with house prices. Although this supports the crowding effect dominates, further analyses demonstrate that there is a threshold. If the residential lands occupy less than 30.13% of the total land in a neighbourhood, the addition of residential lands has a significant, positive relationship with house prices and here, the complementarity effect dominates. Finally, the relationship between land use distribution and house prices appears to be more significant at a smaller neighbourhood level than at the planning area level. These findings provide important planning implications. Land use distributions do matter for residential satisfaction manifested in housing prices and the balanced combination of different land uses is desired in a given neighbourhood. Planners could utilize more mixed uses and flexibility in land uses considering the current residential population and identified objectives of the neighbourhood.