Asset value enhancement of Singapore's public housing main upgrading programme (MUP) policy: A real option analysis approach

David Kim Hin Ho, Chi Man Hui, Muhammad Faishal Bin Ibrahim

Research output: Journal article publicationJournal articleAcademic researchpeer-review

13 Citations (Scopus)


The main upgrading programme (MUP) is a major policy implemented by the Singapore Housing Development Board (HDB) since the 1990s. This heavily subsidised policy is highly targeted in order to enhance the social and economic value of public housing in Singapore. It benefits HDB households residing in the older HDB housing estates in terms of both an enhanced asset value of the household's flat and a quality living environment. An HDB flat owner whose precinct is selected for upgrading under the MUP policy is envisaged to be holding a call option to upgrade his flat, as this option to upgrade is valuable and it has an opportunity to command a higher price in the HDB resale market. This paper estimates the option premiums for upgrading by utilising the intuitive and explicit numerical method solution of the binomial real option pricing model and the Samuelson-McKean closed-form solution. The embedded real option premiums under the MUP policy are estimated at S$10 300 and S$2 000 for the popular three-room HDB flat and four-room HDB flat respectively. It is also found that government subsidies have a significant impact on the option premiums.
Original languageEnglish
Pages (from-to)2329-2361
Number of pages33
JournalUrban Studies
Issue number11
Publication statusPublished - 1 Oct 2009

ASJC Scopus subject areas

  • Environmental Science (miscellaneous)
  • Urban Studies

Cite this