Singapore, 15 January 2020 – A study by the National University of Singapore (NUS) Business School has found that the sale prices of new residential units are about eight per cent lower when senior executives of real estate development firms have informal exchanges while golfing.

According to the study, golf patterns of corporate top executives change significantly following the semi-annual releases of the government’s land sale schedules in Singapore. After land sale announcements, developers increase the frequency of golf games with other developers by 14 per cent in the first week and 24 per cent in the second week relative to the week before such announcements.

Informed bidders acquire land parcels at 14.4 per cent lower compared to other less informed or uninformed winning bidders. The lower bid prices were converted into losses in land sale revenue of more than S$147 million per year between November 2010 to May 2014, which correspond to about 0.2 per cent of the government revenues and about one per cent of the total land sale proceeds, on average. The lower land prices allow the developers to sell new units about eight per cent cheaper.

The study was co-authored by Professor Sumit Agarwal, Low Tuck Kwong Distinguished Professor in Finance, and Professor Sing Tien Foo, Head of Department of Real Estate and Director of Institute of Real Estate and Urban Studies (IREUS); together with Assistant Professor Qin Yu and PhD student Zhang Xiaoyu of the Department of Real Estate at the NUS School of Design and Environment.

Methodology

Evaluating how informal interactions via golf games affect information exchanges, four datasets were used for the data matching process:

  1. Company senior executives in registered developer companies in Singapore;
  2. Golf game records of golf players in Singapore from 2010 to 2014;
  3. Singapore’s government land bidding results from 1990 – 2016 from Urban Redevelopment Authority and Housing and Development Board; and
  4. Transaction records of all private residential properties from 1995 to 2018.

A comprehensive matching process is used to connect the corresponding sample datasets from November 2010 to May 2014; and the final samples include:

  1. 774 senior executives of land bidding firms who golf;
  2. 103 land bids by 895 bidders; and
  3. Seven rounds of land auction announcements

Findings

The study found that such land transactions by informed bidders generate short-term negative spill-overs to other properties in the vicinity. The prices of neighbouring projects are about 9.9 per cent lower within 30 days after the land auction results are publicised, and the effect lasted for no more than 90 days.

Prof Agarwal said, “The ripple effect is seen when these lower land transaction prices send a negative signal indicating a downward market trend for property prices. Senior executives such as directors and CEOs gather information through informal social networks to improve their companies’ performance. While information sharing is not prohibited by law, governments whose fiscal revenue relies on a large proportion of land sale revenues must be prudent of developers’ behaviour on the golf course to ensure a competitive land auction market.”

 

For media enquiries, please contact:

ANG Hui Min
Manager, Corporate Communications
NUS Business School
National University of Singapore
DID: +65 6601 5857
Email: huimin19@nus.edu.sg

 

About National University of Singapore (NUS)

The National University of Singapore (NUS) is Singapore’s flagship university, which offers a global approach to education, research and entrepreneurship, with a focus on Asian perspectives and expertise. We have 17 faculties across three campuses in Singapore, as well as 12 NUS Overseas Colleges across the world. Close to 40,000 students from 100 countries enrich our vibrant and diverse campus community.

Our multidisciplinary and real-world approach to education, research and entrepreneurship enables us to work closely with industry, governments and academia to address crucial and complex issues relevant to Asia and the world. Researchers in our faculties, 29 university-level research institutes, research centres of excellence and corporate labs focus on themes that include energy, environmental and urban sustainability; treatment and prevention of diseases common among Asians; active ageing; advanced materials; as well as risk management and resilience of financial systems. Our latest research focus is on the use of data science, operations research and cybersecurity to support Singapore’s Smart Nation initiative.

For more information on NUS, please visit www.nus.edu.sg.

 

About NUS Business School

The National University of Singapore (NUS) Business School is known for providing management thought leadership from an Asian perspective, enabling its students and corporate partners to leverage global knowledge and Asian insights.

The school has consistently received top rankings in the Asia-Pacific region by independent publications and agencies, such as The Financial Times, Economist Intelligence Unit, and QS Top MBA, in recognition of the quality of its programmes, faculty research and graduates.

The school is accredited by AACSB International (Association to Advance Collegiate Schools of Business) and EQUIS (European Quality Improvement System), endorsements that the school has met the highest standards for business education. The school is also a member of the GMA (Graduate Management Admission) Council, Executive MBA Council, Partnership in Management (PIM) and CEMS (Community of European Management Schools).

For more information, please visit bschool.nus.edu.sg, or go to the Think Business portal, which showcases the School’s research.


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