Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/223661
Title: LEASE DECAY COMPARISON BETWEEN PUBLIC AND PRIVATE HOUSING IN SINGAPORE
Authors: YAO XIAOJIA
Keywords: Department of Real Estate
Lease Decay Comparison
Singapore Housing Market
Diminishing Lease Tenure
Property Price
En Bloc
Real Estate
RE
Tu Yong
2017/2018 RE
Private Condominium
Public Housing
Leasehold Discount
Singapore
Market Speculation
En Bloc Hype
Issue Date: 31-May-2018
Citation: YAO XIAOJIA (2018-05-31). LEASE DECAY COMPARISON BETWEEN PUBLIC AND PRIVATE HOUSING IN SINGAPORE. ScholarBank@NUS Repository.
Abstract: After the previous two rounds of en bloc frenzies in 1997 and 2007, Singapore’s property market seems to be on the upturn amid en bloc fever again. Noting some buyers are forking out high prices for older properties in anticipation of the benefits of redevelopment, National Development Minister Lawrence Wong has warned home buyers against getting swept up in the latest en bloc hype. This paper aims to empirically investigate and compare the impact of diminishing maturities on economic values of both private and public housing in Singapore. Subsequent to this, the paper works to identify price distortions created by the latest en bloc trend and market speculation. Using housing transaction data between 1997 to 2017, the paper has examined and quantified leasehold discounts presented in both public and private housing markets in Singapore. Compelling evidences derived from two fixed effect pricing models show a generally increasing trend of discount rates when remaining lease term diminishes. The paper corresponds to the extant literature by identifying freehold premium and proving a close to zero discount rate for properties with long maturities. Most importantly, by comparing the derived net price discounts per annum between the public and private housing markets, the paper concludes that public housing buyers are speculating for en bloc sales, resulting in deviations of housing transaction prices from a level that would occur if all participants were trading for conventional risk-return optimization.
URI: https://scholarbank.nus.edu.sg/handle/10635/223661
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