Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/226119
Title: EFFECT OF TENURE ON PRIVATE NON-LANDED HOUSING
Authors: TAN HUIHUI
Issue Date: 2004
Citation: TAN HUIHUI (2004). EFFECT OF TENURE ON PRIVATE NON-LANDED HOUSING. ScholarBank@NUS Repository.
Abstract: Drawn in the 1960s, the Balas Table has primarily been used by practitioners as a guide to convert the leasehold to freehold land values. Despite the heavy reliance of it, the assumptions underlying the table remain unknown to date. As the Table was computed based on the dual rate concept, simulations done on a range of accumulative (i) and remunerative (r) rates were conducted. Results reveal an estimated value for i and r at 2.5% and 3.5% respectively. Using the alternative single rate concept to compute the conversion rates, it was found that a single rate of 3% will yield percentages close to the Balas Table. However, when the yield fluctuates, the margin of difference widens, indicating that the Balas Table cannot be depended on as an accurate guiding tool. This research also seeks to estimate the implicit price of the tenure component of housing prices using the hedonic model. Using the transactions of fifteen private residential developments in Serangoon over the three-year period between 2001 to 2003, the estimated freehold premium over leasehold properties was found to be 20.56%. This is much higher than the 4% premium stated in the Balas Table. In addition, when isolating the sales transaction data to only 99-year leasehold properties, the implicit price of an additional lease year is found to be between 1-2%. This means that a reduction of lease to say 60 years would indicate a price discount of about 39%. Hence, affordability levels of private housing can be increased to meet the needs of homebuyers who do not mind a shorter lease term.
URI: https://scholarbank.nus.edu.sg/handle/10635/226119
Appears in Collections:Bachelor's Theses

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