http://www.theedgeproperty.com.sg/co...roperty-prices

The impact of MRT on property prices

By Feily Sofian, Esther Hoon | December 11, 2015 11:25 AM MYT
Tags: Downtown Line 2HDBnon-landed homesBukit Panjang
Bukit Panjang residents will soon enjoy a shorter commuting time to town when Singapore’s latest MRT line, the Downtown Line 2 (DTL2), commences operations on Dec 27. Most people take for granted that a property with good accessibility would command a higher value. The idea originated from Johann Heinrich von Thünen, a 19th century economist, who theorised that a farmer’s profit from his farmland would partially depend on his transportation costs to the market, where buyers and sellers exchange goods.

Inspired by von Thünen, city planner and economist William Alonso proposed in the 1960s that land near the city centre, where jobs and entertainment are located, would command higher rents. His reasoning was simple — residents living close to the city centre can save on transportation costs, including the opportunity costs of commuting such as a loss in leisure and money-making opportunities. While technology has significantly lowered transportation expenses for firms and individuals, the opportunity costs of commuting are still very relevant today.

By virtue of this, the opening of the DTL2 stations would boost the prices of nearby properties. However, some speculated that the upside in property prices would kick in when the government first unveiled the station locations and no further upside is expected when the new MRT line is completed. Others suggested that another round of price upside would ensue shortly before the new MRT line commenced operations.



Smaller HDB flats reaped the most benefits

A study by The Edge Property shows a widening price gap over the years between HDB flats located within 500m of Bukit Panjang MRT station and those located more than 500m from the station. The price gap became glaring in 2014 and 2015 as the opening of the DTL2 stations drew closer, with four- and five-room HDB flats within walking distance of Bukit Panjang station commanding more than a 20% price premium over those that were not.

The study also suggests that smaller HDB flats benefited the most from the proximity to the stations. Four-room flats near Bukit Panjang station commanded an estimated price premium of 15% in 2010 and 2011 and 17% in 2012 and 2013. The price premium spiked to 24% in 2014 and 2015 (see Chart 1 on next page). In the meantime, the price gap for five-room flats widened from around 14% between 2010 and 2013 to 22% in 2014 and 2015 (see Chart 2).

Quantum-wise, four- and five-room flats within 500m of Bukit Panjang station fetched an average price of $461,000 and $577,000 respectively in 2015. Those located more than 500m from the station changed hands at an average price of $372,000 and $475,000 respectively.

HDB flats located near Bukit Panjang station were not spared the bearish market sentiment but prices have generally been more resilient than those further from the station. For example, prices of four-room flats located within 500m of Bukit Panjang station fell 10% from an average of $511,000 in 2013, to $461,000 in 2015 while those of five-room flats fell 5% from $607,000 to $577,000. On the other hand, HDB blocks located more than 500m from Bukit Panjang station witnessed a steeper price decline over the same period, averaging 15% to $372,000 for four-room flats and 12% to $475,000 for five-room flats.

There is some evidence of an increasing price premium for executive HDB flats located near Bukit Panjang station, but it is less pronounced than four- and five-room flats. Residents living in smaller flats are likely to be more dependent on public transportation, which explains the jump in price premium towards the opening of the station. Based on historical resale statistics, there is no three-room flat within 500m of Bukit Panjang station.



Mixed impact on private homes

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