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Declining discount rates in Singapore's market for privately developed apartments

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  • Eric Fesselmeyer
  • Haoming Liu
  • Alberto Salvo

Abstract

Singapore's market for new privately developed apartments exhibits wide quasi‐experimental variation in ownership tenure. We develop an empirical model in which prices are decomposed into the utility of housing services and a factor that shifts with asset tenure and the discount rate schedule, which we discipline to vary smoothly over time. We estimate discount rates that decline over time and, to accommodate the observed price differences, fall to 0.5–1.5% p.a. by year 400. The finding that households making sizable transactions do not entirely discount benefits accruing centuries from today is relevant, with the appropriate risk adjustment, for evaluating climate‐change investments.

Suggested Citation

  • Eric Fesselmeyer & Haoming Liu & Alberto Salvo, 2022. "Declining discount rates in Singapore's market for privately developed apartments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(2), pages 330-350, March.
    • Handle: RePEc:wly:japmet:v:37:y:2022:i:2:p:330-350
    DOI: 10.1002/jae.2867
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    Cited by:

    1. Fesselmeyer, Eric & Liu, Haoming & Poco, Louisa, 2021. "How Much Do Households Dislike Local Density? And Do Developers Fully Consider Their Preferences? Evidence from a Policy Change in Singapore," IZA Discussion Papers 14730, Institute of Labor Economics (IZA).
    2. Andrew Purves, 2024. "Singapore's Imminent Expiration of Land Leases: From Growth and Equality to Discontent and Inequality?," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 115(1), pages 155-169, February.
    3. Eric Fesselmeyer & Haoming Liu & Louisa Poco, 2024. "Within‐development density and housing prices in Singapore," Journal of Regional Science, Wiley Blackwell, vol. 64(2), pages 406-427, March.
    4. Andersen, Carsten, 2022. "Do distant rent flows matter? Inferring discount rates from leasehold apartments in Denmark," Economics Letters, Elsevier, vol. 219(C).

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