The impact of construction quality on house prices

This paper examines the impact of workmanship and construction quality of new housing on their sale price and capital growth. To measure construction quality, we take advantage of a unique situation in Singapore where newly completed residential projects are assessed independently on their workmanship under the Construction Quality Assessment System (CONQUAS). Examining 100,593 sale transactions of apartment units in 205 residential developments completed between 1998 and 2010, we find strong evidence that their selling price and appreciation rate are related significantly to construction quality of the new homes. Moreover, the “quality” premium is present in both the primary and secondary markets. The empirical evidence suggests that apartments that are well constructed not only command a higher price for developers, but they also generate higher capital gains for homeowners and investors in the future.