IMPACTS OF CARBON TAX ON VALUATION OF INDUSTRIAL PROPERTIES IN SINGAPORE

Abstract

To ensure real estate markets operate effectively, real estate valuation is a professional discipline that is required to determine the market price of any real estate at a specific point in time. Over the years, global GHG emissions have not stopped increasing, despite the multiple warnings from various experts of the negative consequences that will happen. As a result, more countries have been trying to play a part to reduce emissions, by implementing carbon pricing schemes as they seek to create living spaces that are greener and more resilient. Meanwhile, one of Singapore’s mitigation measures to reduce emissions is to implement a carbon tax policy, which is the first carbon pricing scheme in Southeast Asia. With the implementation of a new policy in Singapore, there is insufficient research being done to analyse how the carbon tax policy will affect the local economy and the valuations of industrial properties, especially large direct emitters. Thus, this is one of the key motivations for this study. Just like any other asset class, the value of industrial properties is driven by demand and supply. Consequently, the next key motivation of this study is to analyse how the market for industrial properties and the different stakeholders, such as developers, landlords, tenants, investors, and the Singapore government, will be affected by the new policy. Through an online questionnaire, the responses collected from professional real estate valuers with various working experiences in the real estate industry were evaluated for analysis. Upon analysing the industrial properties market, the study will then evaluate what are the frequently used valuation methods to value the large direct emitters’ industrial properties, which are the income approaches and Direct Comparison method. Further on, there will be an exploration of how the valuations of these properties would be affected.