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Lease Decay and the Prices of Private Residential Properties in Singapore

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  • Xin Rang Sophronia Sia

    (National University of Singapore)

Abstract

Singapore's residential properties sold mainly on 99-year and freehold leases are useful for studying how changing leases and age affect property values. This paper uses the hedonic model to analyze the effect of lease decay on transaction prices for non-landed, private residential 99-year leasehold properties. The results find a negative effect of leasedecay on the transaction price, or more specifically, a 1% increase in theremaining lease increases prices by 1.46%. The effects of decay differbetween freehold and leasehold properties, thus implying that age has negative effects on freehold property prices but positive effects onleasehold prices. The results show that older properties could increasein value after controlling for the physical decay effect.

Suggested Citation

  • Xin Rang Sophronia Sia, 2022. "Lease Decay and the Prices of Private Residential Properties in Singapore," International Real Estate Review, Global Social Science Institute, vol. 25(3), pages 401-421.
    • Handle: RePEc:ire:issued:v:25:n:03:2022:p:401-421
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    References listed on IDEAS

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    4. Liang Jiang & Peter C.B. Phillips & Jun Yu, 2014. "A New Hedonic Regression for Real Estate Prices Applied to the Singapore Residential Market," Working Papers 19-2014, Singapore Management University, School of Economics.
    5. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    6. Bowes, David R. & Ihlanfeldt, Keith R., 2001. "Identifying the Impacts of Rail Transit Stations on Residential Property Values," Journal of Urban Economics, Elsevier, vol. 50(1), pages 1-25, July.
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