The spillover effects of infill developments on local housing prices

• Infill developments have a positive impact on nearby houses.
• The price effect starts before the inception of the new project.
• New developments built on teardown sites have stronger spillover effects.
• Pricing of units in the new development also affects the spillover effects.

This paper examines the spillover effects of infill developments, which involve developing vacant or under-used parcels within existing urban areas that are largely developed, on local housing prices. Employing a difference-in-difference specification on a sample of 275 new developments and 55,887 sale transactions of houses in Singapore, we find that infill developments have a positive and persistent impact on local housing prices. The contagion effect is larger for infill developments that are built on teardown sites. The spillover effect can also be traced to the overpricing of new homes by developers. Overall, the evidence indicates that developers act as price leaders and contribute significantly to price discovery in the local housing market.