Principal Investigator : by Yu Shi Ming, Han Sun Sheng & Jeremy Chai
Real estate values are affected by many factors, some of which could be quantitatively defined while many are often subjectively assessed. Factors such as location, orientation, view and the quality of the environment are amenities that could be difficult to quantify. However, they are likely to have a substantial impact on property values in the context of Singapore where the supply of land for new developments is limited. Whilst much has been studied on the impact of location, there has been little research on the effect of view and orientation. With new developments at greater heights and densities, the consideration for view and orientation will become even more significant not only for new developments but also existing ones, which may be obstructed by the new developments.
A research project was undertaken at the Department of Real Estate, National University of Singapore, to provide a better approach in quantifying the view of residential properties in Singapore and to evaluate how it affects property value.
The primary methodology developed for this research is the application of GIS and 3-D modeling to quantify the view and orientation of high-rise residential properties. In particular, the research focuses on the approaches to analyse visibility or view. This led to the development of a Viewshed Index based on GIS and ArcView 3D Analyst. The Viewshed Index Construction is then applied to two main scenarios: the measure of existing views of high-rise residential properties and the simulation of the maximization of views for a new development. Other methodologies, including the intervention analysis model and other statistical techniques, are also employed in the research. We apply intervention analysis, for instance, in the assessment of the impact of the obstruction of view on house prices.
Note: The portion in white represents the viewshed. The different color schemes in the grid output represent the different elevation height of the study area.
In the project, view is analysed in terms of obstruction, measurement and simulation. First, we evaluate the impact of an obstruction in view for existing properties when new developments are launched. We conclude that this adverse impact translates into an average reduction in price of about 8% in the case of The Bayshore when Costa del Sol began its construction. Second, the construction of the Viewshed Index is applied to the measurement of existing views of high-rise residential properties. We estimate the premium for a full sea view for private housing in the East Coast area is about $233,000 or about 15% of the average selling price based on data from 1990 to 2002. Next, the Viewshed Index is applied to a new development where a simulation of views and orientations is carried out to maximise the positive impact on selling prices. This can help developers in their pricing strategies to maximize on units with good views.
We also applied the analysis to a public housing estate in the East Coast area. Our regression results show that the premiums public housing buyers are willing to pay for good views are significantly lower than those in private housing. The average premium for view in HDB flats in Marine Parade is about $20,000 or 8.5% of the average transaction price.
There are four key implications and recommendations from the study. First, a more quantitative and logical approach can be adopted in assessing subjective variables that affect the pricing and valuation of residential properties. This can help to enhance the valuers' assessment as it is more objective as compared to the traditional rules of thumb. Second, while most buyers are willing to pay a hefty premium for units with a good view, they should ensure that the view will not be affected in future by new developments. Buyers should have a basic understanding of the planning framework and ability to analyse the information in their decision-making process when buying properties or they should engage consultants who will provide professional advice. Third, the methodology developed using GIS and 3-D simulation can help developers to maximise the layout of their projects to achieve the best views and therefore higher premiums. The simulation will be able to assist developers in their pricing of new developments. And last but not least, it is also important for policy makers to consider the impact of view on property values. This is especially so as the new Downtown and Marina area provide new buildings with panoramic views. However, the impact of such views may be different for different property uses. Although our analysis is restricted to only residential developments, the disparity in premium between public and private housing is a case in point. In the same vein, offices may not achieve the same level of premium as residential condominiums.