A New Mass Rapid Transit (MRT) Line Construction and Housing Wealth: Evidence from the Circle Line

32 Pages Posted: 17 Jan 2017 Last revised: 3 Feb 2017

See all articles by Mi Diao

Mi Diao

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

Yi Fan

National University of Singapore (NUS)

Tien Foo Sing

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

Date Written: February 3, 2017

Abstract

This study uses the opening of the new Mass Rapid Transit (MRT) line, known as the Circle Line (CL), in stages between 2010 and 2012 in Singapore as the exogenous event to empirically test the impact of the new CL on housing wealth of households. Applying a “differences-in-differences” approach to the non-landed private housing transaction data covering the period from 2009 to 2013, we find that the average housing prices increase by 1.6% in the post-opening of the CL. We find significant capitalization of the new CL into housing prices, especially households living within a 400-meter radius (the treatment zone) from the closest MRT stations on the CL. The treatment effects that are measured by the marginal willingness to pay for houses located within the treatment zone is 13.2% relative to houses located outside the treatment zone. The new CL opening creates an estimated S$1.23 billion housing wealth effects for households living in close proximity to the CL MRT stations. However, we do not find significant “anticipative” effects on house prices in the 6-month window prior to the opening of CL. The strongest treatment effect is found after the opening of the phase 1 of CL, and the treatment intensity declines in phases 2 and 3 of the CL opening.

Keywords: Mass Rapid Transit (MRT) Line, Difference-In-Differences Approach, Treatment Effects, Marginal Willingness-to-Pay, Housing Wealth

JEL Classification: R14, R3, R4

Suggested Citation

Diao, Mi and Fan, Yi and Sing, Tien Foo, A New Mass Rapid Transit (MRT) Line Construction and Housing Wealth: Evidence from the Circle Line (February 3, 2017). Available at SSRN: https://ssrn.com/abstract=2899470 or http://dx.doi.org/10.2139/ssrn.2899470

Mi Diao

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

4 Architecture Drive
Singapore 117566
Singapore

Yi Fan

National University of Singapore (NUS) ( email )

4 Architecture Drive
Singapore, 117566
Singapore

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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