‘Clustering’ in some neighbourhoods due to purchasing power disparity

Cheryl ChiewJuly 26, 2021

HDB EIP

Chinese clusters were seen in central areas, while Malay clusters were in the northern and eastern neighbourhoods; Indian clusters were found in Admiralty, Pasir Ris Drive and Boon Lay as well as areas such as Kampong Java and Bendemeer.

A study showed that homeowners from the main ethnic racial groups—namely, Chinese, Malays and Indians—have been gravitating towards certain parts of Singapore, despite the implementation of the Ethnic Integration Policy (EIP), reported TODAY.

The study was led by Associate Professor Leong Chan-Hoong, a psychologist and statistician from the Singapore University of Social Sciences. Since 2016, Assoc Prof Leong has been studying the spatial distribution of Housing and Development Board (HDB) blocks that have met their EIP limits.

In August 2020, the study was published in a book titled, Building Resilient Neighbourhoods in Singapore, which was also co-edited by Assoc Prof Leong.

According to the study, the proportion of HDB blocks that have achieved the occupancy quota for at least one of the ethnic groups increased from 28% in 2016 to 33% in 2021.

The percentage of blocks that had achieved the Chinese quota remained largely stable at about 17% since 2016, while the figure for Malaysia doubled to 10.1% this year from 4.7% in 2016. The figures for Indians also increased to 8.8% from 6.8% over the same period.

Assoc Prof Leong attributed the clustering trend primarily to the differences in the purchasing power of the different ethnic groups, with price as the main consideration.

In his study, a cluster is considered to have been formed when at least five or six blocks within a group of 10 blocks at a certain neighbourhood had met their ethnic quota.

Using HDB data, he calculated the average resale prices per sq m of flats in different neighbourhoods based on resale transactions between 2017 and 2019.

Assoc Prof Leong then mapped out the neighbourhoods based on the following average resale price bands—$3,000 to $3,958.46; $3,958.47 to $4,699.24; $4,699.25 to $5,492.50; $5,492.51 to $6,501.28; and $6,501.29 to $9,000.

His study showed that Chinese households tend to set up homes in areas where resale flat prices were higher compared to where minority races had formed clusters.

Chua Beng Huat, a sociologist from the National University of Singapore (NUS), believes clustering may be driven by cost rather than a desire to live with those of similar ethnicity.

Chinese clusters were seen in central areas like Bukit Ho Swee, Bishan East, Holland Drive, Cheng San, Tiong Bahru and Marymount, where the average resale price per sq m (psm) for an HDB flat hovered between $3,958.47 and $6,501.28.

Malay clusters were in the northern parts of Singapore, like North Coast in Woodlands and Woodlands West as well as the eastern neighbourhoods such as Pasir Ris Drive and Tampines East. The average resale price psm stood at between $3,000 and $3,958.46 in the north, and between $3,000 and $4,699.24 in the east.

Indian clusters were found in Admiralty, Pasir Ris Drive and Boon Lay where resale prices psm hovered at between $3,000 and $3,958.46.

There were also Indian clusters in areas with higher resale prices, such as Kampong Java and Bendemeer, where the average resale price psm ranged between $5,492.51 and $6,501.28.

The emergence of Indian clusters in both areas with low and high average resale prices could be due to the “difference in choice… between local-born Indians and naturalised Indians”, said Assoc Prof Leong.

“We do not have residential location segmented by place of birth and income, but we know that permanent residents and by extension, naturalised citizens, tend to have higher income than average Singaporeans,” he added as quoted by TODAY.

The latest census data from the Department of Statistics showed that while the median household income from work increased across the board for all households from 2010 to 2020, the increases for Indian and Chinese households outpaced the hike for Malay households. Last year, the median household income from work for Indians stood at $8,500, $7,972 for Chinese and $5,704 for Malays.

While Indians have the highest median household income, Chinese homebuyers are able to “dictate” market forces in resale prices since they make up the majority, said Assoc Prof Leong.

“Given the numerical dominance, if the majority of Chinese decide to move into a residential neighbourhood, that will drive up resale prices and limit the options for minority home buyers with lower purchasing power,” he explained.

Although cost may be a factor in the formation of clusters, most property analysts and sociologists believe that there could be other factors to such formation, such as being near to workplaces and family.

Christine Sun, OrangeTee’s Senior Vice-President of Research and Analytics, said the preference for a certain neighbourhood might be driven by industries that hire a higher proportion of a certain race.

Nicholas Mak, Head of Research and Consultancy at ERA, on the other hand, said location also plays a role in buying decisions. He noted that many buyers prefer areas near their parents, schools where their children attend or workplaces.

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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg 

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