By Property Soul (Guest Contributor)
If you have a good memory, you may recall that I have wrote to The Straits Times Forum in December last year with a letter titled “Public deserves reliable, consistent data”.In the URA’s reply, they mentioned they were working towards making improvements to the property market data and would release the net prices of individual units sold by developers on their website in the first half of 2015.
On April Fool’s Day, the URA finally announced the improved the computation methodology of their PPI (Property Price Index) to better reflect price changes in private residential market. This is first reflected in the release of the flash estimate for the 1st Quarter 2015.
6 changes in the new PPI
According to URA’s press release on 1 April 2015, the long-awaited PPI revision (their last revision was in 2000) covers six major changes:
1. Property Attributes
Besides location, tenure, property type and completion status, the PPI will now take into consideration the property attributes (e.g. size, age) and micro-location (e.g. proximity to the MRT station).
2. Tracking Methodology
To account for differences in housing characteristics, from now on, the PPI is calculated based on the Stratified Hedonic Regression Method instead of the previous Stratification Method.
3. Weighted Average
The usual 12-quarter moving average weights now become 5-quarter fixed weights.
4. Base Year
The base period has been changed from 4Q1998 to 1Q2009.
5. Data Source
Apart from caveats lodged and new units sold by developers, data sources now include stamp duty transactions from the Inland Revenue Authority of Singapore.
6. Price Indices
URA will show price trends on a broad rather than micro or localized level. From 1st Quarter 2015, only the following property price indices will be published:
– Residential Properties
– Landed Residential Properties
– Non-Landed Residential Properties
– Non-Landed Residential Properties in Core Central Region, Rest of Central Region and Outside Central Region
If one compares these PPIs with the previous indices, sub-categories like completion status (completed vs uncompleted) and property type (Apartment, Condominium, Detached, Semi-detached and Terrace) have not been mentioned. The picture will be clearer when the full set of 1Q2015 price indices are out in 4 weeks’ time.
Implications behind the changes
What are the implications for the improvement of URA’s PPI?
1. More comprehensive coverage and higher representation
In the past, only data from the Singapore Land Authority was accounted for, even though lodging caveats with SLA is on a voluntary basis. Furthermore, survey data on new units sold for uncompleted projects rely on honest contributions by property developers.
Since buyers of all properties have to pay buyer stamp duty, it should theoretically be possible to capture all private housing transactions. The expanded data collection source to cover stamp duty payments is definitely more comprehensive.
2. More meaningful comparisons among projects
Property prices of various projects, though in the same district, can differ significantly depending on their actual location, age of the property, etc. With the addition of more property attributes like micro-location and size or age of the transacted unit, the public is able to make more meaningful comparisons of the pricing data.
3. Increased difficulty to compare with past data
With the base period 4Q1998 shifted to 1Q2009, and 12-quarter moving average weights changed to 5-quarter fixed weights, the PPI now puts more emphasis on price comparisons for the last few years rather than over the past decades.
With the changes in tracking methodology, it is now increasingly difficult to make apple-to-apple comparisons with the old set of PPI data.
URA’s written reply to my letter dated Dec 23, 2014had promised the release of the net prices of individual units sold by developers in the first half of next year. The public is looking forward to see the actual transacted prices of units bought directly from developers, less all the stamp duty absorption, subsidies, rebates and incentives offered.