Redevelopment Values in Multi-Family Properties: Evidence from En bloc Sales in Singapore

Abstract

“Teardown” or redevelopment is an effective policy tool to increase supply elasticity in land-scarce cities. In Singapore, redevelopment of older multi-family properties requires the consent of majority owners to sell their units collectively in a process widely known as “en bloc” sales. Using the resale transaction data in Singapore from 1995 to 2018, we find that private multi-family properties with redevelopment potentials sell at significant premiums of between 20.2% and 29%. The redevelopment option premiums increase by 3.6% to 8.1% after the consent of majority owners to sell the redevelopment rights is obtained. The anticipative effects are observed in resale transactions as early as one year before the en bloc sale events. The redevelopment premiums increase from 8.4%% to 13.64% when sales occur in 7 to 12 months and within 6 months from the en bloc event, respectively. The results are robust and orthogonal to supply constraints in the markets.

Keywords: Teardown, Redevelopment Options, En bloc Sales, Multi-Family Houses, Anticipative Effects

JEL Classification: K11, R31, R51