Social Interactions and Segregation in Public Housing Neighbourhoods in Singapore

Abstract

This paper investigates cultural amenities and social interactions in Singapore’s resale public housing market. Based on a unique dataset on the Cash-Over-Valuation (COV), which measures differences between transaction prices and appraisal values, for a sample of 73,048 resale public housing transactions from 2007 to 2012, we find that COV per square meter (psm), which is a proxy for premiums that are above the “objective” values of houses, significantly increases with the fraction of a selected ethnic group in housing blocks. The results imply that buyers value social interactions and cultural affinity in housing blocks with high concentration of households of the same ethnic group. To live in a block with more than 90th percentile of residents from their own ethnic groups, Chinese or Malay buyers pay an additional SGD 98.74 and SGD 102.60 for COV per square meter (psm), respectively, which is equivalent to about 2.36% and 2.46%, respectively, of the average transaction prices. We also find that Chinese buyers pay SGD 43.63 more in COV psm in blocks with Chinese’s binding-quota, but pay SGD 11.24 and SGD 41.99 less in blocks with Malay’s and Indian’s binding-quotas, respectively. Lastly, we also show that additional COV are found relatively positive premiums for the within-ethnicity transactions relative to the cross-ethnicity transactions, which support the literature arguing on positive information spillovers and network effects between buyers and sellers of the same ethnicity group.