Analysts welcome URA’s new method to track private property prices

SINGAPORE — Starting with the flash estimates for the first quarter released yesterday, the Urban Redevelopment Authority (URA) has adopted a new method to track private property prices. It takes into consideration more attributes, such as the size and age of a unit and its proximity to MRT stations. These will be added to the attributes used in the previous method, such as tenure, property type and general location.

The URA’s move comes on the heels of the Housing and Development Board introducing, late last year, a similar method for its resale price index. Analysts welcomed the adoption of the new method for private property prices, noting that its overall benefits will be felt more keenly, compared with the public housing market.

Among other things, the new method will include stamp duty data from the Inland Revenue Authority of Singapore — a vast improvement compared with the old practice of using data based on caveats lodged, said Mr Eugene Lim, key executive officer of ERA Real Estate.

“By using stamp duty data, essentially all property transactions are captured to compute the (private property index),” he said.

Data would also not be skewed by low transaction volume in a particular period and the proliferation of “shoebox” apartments in recent years.

The revised index is calculated using the first quarter of 2009 as the new base period. The URA said back-testing of this new method showed no change in the broad trend of price movements. For example, using the old method, prices in the third and fourth quarters of last year fell by 0.7 and 1.1 per cent, respectively. Under the revised index, prices fell by 0.8 per cent in each of these quarters.

Dr Lee Nai Jia, DTZ associate director of research, said the revised index will capture more timely price movements. He noted that since the last revision of the index in 2000, new types of housing developments such as shoebox apartments have entered the market.

The URA said as much: “Since the last revision ... the private housing market has become more diverse. For instance, there is greater variation in the unit size and age of private housing developments.”

The revised index also switched from 12-quarter moving average weights to five-quarter fixed weights. These fixed weights, which factor in the total value of transactions, will be updated every three years to reflect the prevailing market structure.

Associate Professor Lum Sau Kim, of the Institute of Real Estate Studies at the National University of Singapore, was a consultant to the URA for the review.

“Since the last review, we felt that the market has evolved, with new housing formats,” she said. Also, there is a wider range of ages for the houses.

“Differences in these kinds of attributes ... do affect price. So we want to be able to filter out these effects,” she added.

The URA said six types of price indices will be published — for residential properties, landed residential properties, non-landed residential properties, non-landed residential properties in the Core Central Region, Outside Central Region as well as Rest of Central region. The private residential rental indices will also be computed using the new method.

The Singapore Real Estate Exchange, which publishes its own monthly flash estimates, said it will continue to use data from 15 estate agencies here — representing about 90 per cent of the market — to supplement the URA’s data, which is published only every quarter, said Mr Jeremy Lee, co-founder of SRX.