EFFECT OF MAIN UPGRADING PROGRAMME ON VALUES OF NEIGHBOURING CONDOMINIUMS

Abstract

The Main Upgrading Programme (MUP) was first introduced in Singapore in July 1989. Its main objective was to upgrade the older Housing and Development Board (HDB) flats Quite a number of studies had been done to find out whether MUP does increase the price of the flats concerned. However, non has been done to find out whether MUP affect the prices of neighbouring properties. This dissertation attempts to find out whether MUP has any effect on neighbhouring condominiums' prices. This was done by controlling the other variables that affect the prices of the condominiums. The sample consisted of condominiums located within 800 meters to the MUP sites and an equal proportion of condominiums not within the 800 meters range to the MUP sites. All the sales transactions from 1995 to 2003 of these condominiums were used in the running of the Hedonic Pricing Model. The log-linear functional form of the Hedonic Pricing Model was used to generate the results. The results showed that condominiums found within 200 meters, 200 to 500 meters and 500 to 800 meters from the MUP sites were affected by the MUP. Condominiums within the 200 meters range are negatively affected due to all the negative effects like noise and air pollutions, disturbances and inconveniences brought by the MUP. Even though prices of these condominiums may increase after the MUP is completed due to the improved surroundings, this increase is insufficient to offset the initial decrease. Condominiums within the 200 to 500 meters rage are positively affected by the MUP, as they do not suffer from the negative effects like those condominiums within the 200 meters range but enjoy the benefits of improved surrounding brought by the MUP Condominiums within the 500 to 800 meters range are negatively affected. This is due to a decrease in demand as homebuyers would rather buy the condominiums in the 200 to 500 meters range due to the positive benefit of the MUP if they are looking for a unit in the same vicinity. Looking at the results, there may be some inequitability for residents of condominiums within 200 meters and 500 to 800 meters to the MUP sites These residents help to pay for MUP through paying taxes, which the government uses to subsidize the upgrading costs. Thus, it may be inequitable for them to help pay for the upgrading cost and at the same time, suffer from losses from the decrease of their condominiums' prices. There is also a need to consider whether residents of condominiums within the 200 to 500 meters range to the MUP sites, need to pay more for the MUP through the taxes they pay as they gain from MUP without any losses. Through this dissertation, the actual cost and benefit of MUP can be assessed and the question of equitability is raised and looked into.