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

Abstract

This study uses the opening of a new Mass Rapid Transit (MRT) line, known as the Circle Line (CL), between 2010 and 2012 in Singapore as the exogenous event to empirically test the impact of the new CL on housing wealth of households. Using a differences-in-differences (DID) approach, and with the non-landed private housing transaction data covering the period from 2009 to 2013, we find that the average housing prices in our sample increase by 1.6% in the post-opening of the CL. We also 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 of S$1.23 billion housing effects for households living in the 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 intensity of treatment effects declines in phases 2 and 3 of the CL opening. The results show strong evidence of the causality from the accessibility to MRT stations on housing prices.