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Impact of Electronic Road Pricing on Real Estate Prices in Singapore

34 Pages Posted: 2 May 2014 Last revised: 16 Aug 2017

Sumit Agarwal

Georgetown University - Department of Finance

Kang Mo Koo

Deakin University-Department of Finance

Tien Foo Sing

National University of Singapore (NUS) - Department of Real Estate

Date Written: September 15, 2015

Abstract

Since 1998, Singapore has had an Electronic Road Pricing (ERP) system set up with a network of toll gantries to tax vehicles entering designated areas in the city center during peak hours. Using the congestion rate hike with effect from November 1, 2010 as an exogenous shock, we test the effects of the ERP rate hike on retail, office and residential real estate prices. The results show that the November 2010 congestion toll rate increases cause a 19% drop in retail real estate prices within the cordon ERP areas relative to retail real estate prices outside the cordon ERP areas. The results are statistically and economically significant. However, the toll rate hike has no significant impact private office and residential real estate within cordoned ERP areas. The robustness and falsification tests could not reject the negative effects associated with the toll rate hike on retail real estate prices.

Keywords: Congestion Tax, Traffic Management, Electric Road Pricing (ERP), Externality Effect, Real Estate Prices

JEL Classification: D1, R3, R4, R5

Suggested Citation

Agarwal, Sumit and Koo, Kang Mo and Sing, Tien Foo, Impact of Electronic Road Pricing on Real Estate Prices in Singapore (September 15, 2015). Available at SSRN: https://ssrn.com/abstract=2432052 or http://dx.doi.org/10.2139/ssrn.2432052

Sumit Agarwal

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)

HOME PAGE: http://www.ushakrisna.com

Kang Mo Koo

Deakin University-Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria
Australia

Tien Foo Sing (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

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