HDB resale price index to be revised

New way to better reflect HDB resale market
By Janice Heng, The Straits Times, 10 Dec 2014

THE way the Housing Board's resale price index (RPI) is calculated will undergo a total revamp to give a better reading of the resale market.

The new methodology takes into account more characteristics of the flats in the calculation of the market's general price movements.

Details were released yesterday after National Development Minister Khaw Boon Wan announced last week that a review of the index had been completed.

He noted then that the existing method "may not adequately reflect the resale market", which now sees more varied flats and more transactions in newer towns since it was last revised in 2002.

"It is therefore timely to review the RPI methodology to better capture price changes over time, and control for the variations in attributes of the resale flats transacted," he said.

Currently, the resale market is divided into segments by flat type and region, such as a three-room flat in the north or a four-room flat in the west. Average prices are calculated for each segment, and then aggregated to derive the overall index.

The new method sorts the market by flat type, such as three- room, four-room and five-room. It uses a technical method called hedonic regression to strip out the effect of flat attributes on its price.

Attributes such as where the flat is situated, whether it is near an MRT station, on the second or 24th floor, can significantly alter the price of the unit. When these are stripped out, "pure price changes" remain, which reflect the market more accurately, said Associate Professor Lum Sau Kim from the National University of Singapore's department of real estate, who was a consultant in the review.

When the HDB tested the new method on 2014 data, it showed the same downward trend, though with slightly larger falls.

PropNex Realty chief executive officer Mohamed Ismail also expects the new index to fall more in the coming quarters, compared with the current version, due to the inclusion of new estates such as Sengkang, where demand is weaker.

Past values of the resale price index will not be re-calculated.

But the index will adopt a new base period, which is the first quarter of 2009, instead of the existing fourth quarter of 1998. This does not affect any of the percentage changes over time.

The new method will be used starting from the next release of quarterly figures on Jan 2.

"For academics and analysts, this is, of course, a more accurate representation of market direction," said ERA Realty key executive officer Eugene Lim.

But it will not make much difference to laymen, for whom specific recent transactions - which HDB publishes on its website - are more relevant, he added.




HDB resale price index to be revised

Figures do not reflect changes in resale scene: Khaw

By Yeo Sam Jo, The Straits Times, 4 Dec 2014

THE resale price index of public housing will soon be revised to better reflect the market's growing diversity.

This is because the current quarterly figures have failed to capture three changes in the Housing Board resale scene, said National Development Minister Khaw Boon Wan in a blog post yesterday.

Post by Ministry of National Development.

First, more flat types and designs are available on the market now. These include taller blocks and three-room flats, which were reintroduced from 2004.

Second, there are more resale transactions in newer towns such as Punggol, Sengkang and Sembawang, but these are not included in the current resale price index (RPI).

Third, flats transacted in the market have a wider age range today, with a growing number of older flats.

"With these significant changes in the HDB resale market, the current RPI may not adequately reflect the resale market," said Mr Khaw. "It is therefore timely to review the RPI methodology to better capture price changes over time, and control for the variations in attributes of the resale flats transacted."

Now, the index is computed by taking the average resale flat prices for a representative basket, across different flat types, models and regions, based on actual transactions.

The average prices for each category are then aggregated to derive the index, which was last revised in 2002.

Mr Khaw said the HDB has been working with a consultant from the National University of Singapore's department of real estate to review the index computation methodology, and more details will be released soon.

Flat owners, buyers and property experts said that the change is a timely update that will provide more accurate information.

"This will help me better gauge the price to expect from my sale," said IT executive Govindaraj Kuppusamy, 45, who is selling his five-room flat in Sengkang.

PropNex Realty chief executive Mohamed Ismail Gafoor said it is important to include new towns like Sengkang and Punggol, as there have been plenty of transactions there.

Analysts suggested that the index could be divided into sub- indexes like mature and non-mature estates, akin to how the Urban Redevelopment Authority's private property index displays figures for three main regions.

"A more granular representation would be more relevant to HDB buyers and sellers," said Mr Mohamed Ismail.

ERA Realty key executive officer Eugene Lim agreed: "The price in a particular area might be trending differently from the island-wide index, which is currently not segmented."

But Century21 chief executive Ku Swee Yong cautioned against relying too heavily on the index.

He said: "(It) is a general aggregate of the whole country's price trend. Buyers and sellers of specific properties should work closely with a trustworthy agent and consult with property valuers before signing their contracts."

Three significant changes

CURRENT figures do not capture these changes in the HDB resale market, said Minister Khaw Boon Wan:

- More flat types and designs are available now.

- More resale transactions in newer towns but these are not included in the current index.

- Flats transacted in the market have a wider age range.

Private property price tracker under review
By Rennie Whang, The Straits Times, 4 Dec 2014

A WIDELY watched index used to track prices in the private property sector may be revamped to give a more up-to-date picture of the market.

There has been concern that the property price index (PPI), as it is called, does not give an accurate snapshot because it does not take into account the different type of units available, their size and quality. There are also too few transactions included.

The index, last modified in 2000 by the Urban Redevelopment Authority (URA), is also issued quarterly, which some say hinders its ability to be timely in a fast-changing market.

URA said yesterday that it is reviewing the need to revise it, in line with the revision of the Housing Board's resale price index (RPI). It added that reviews are done "periodically... to understand other ways of computing property price indices and ascertain the robustness of the PPI".

The review will take time as the index is more complex, a spokesman said. "Unlike the RPI, the PPI is computed for both completed and uncompleted units. Additionally, there is greater diversity in private housing."

The Singapore Real Estate Exchange and National University of Singapore (NUS) both produce indexes tracking prices. These are issued monthly.

The PPI is based on transaction prices from caveats lodged and uses a "moving average" method. This means the weights used to compute it are derived by taking the moving average of the values of properties transacted in each market segment over 12 quarters.

But Associate Professor Sing Tien Foo of NUS' department of real estate said it fails to account for changes in the quality of property in different locations.

HDB resale flat prices continue to head south
Prices fall across the board for 10th month; number of deals also down
By Janice Heng, The Straits Times, 5 Dec 2014

THE public housing resale market stayed gloomy in November, with prices falling for the 10th month in a row.

Buyers' spirits seemed dampened during the monsoon chill, with the number of deals falling after having risen for two months.

The volume is expected to rebound next year, said analysts, as fewer new flats are launched. But for prices, the dreary showing is likely to continue.

Housing Board resale prices fell 0.8 per cent to hit a 40-month low last month, according to flash figures from the Singapore Real Estate Exchange (SRX) yesterday.

Updated figures also showed that an apparent glimmer of light in October was an illusion.

In SRX's initial figures for October, resale prices edged up 0.1 per cent after eight months of decline. But yesterday's update showed that prices actually fell 0.1 per cent that month.

This makes November's fall the 10th in a row.

Prices fell for all flat types, dipping 0.8 per cent, 1.2 per cent, 0.2 per cent and 2.2 per cent for three-, four- and five-room and executive flats respectively.

Apart from the traditionally slow year-end season, the slide in prices was to be expected as loan curbs continue to bite, said experts.

ERA Realty key executive officer Eugene Lim expects prices to decline by another 5 per cent to 8 per cent next year, if resale policies and loan criteria do not change. He is more optimistic about transactions.

This year may see a historic low of about 17,000 flats changing hands, but there may be "some rebound" next year, he said. This is thanks to fewer new flats next year and the continued stabilisation of resale prices.

There were 1,350 resale flats sold last month. This was down from 1,553 in October, but still more than the 1,212 units sold in November last year.

R'ST Research director Ong Kah Seng also expects transactions to "recover slightly next year, especially after the Chinese New Year".

But this may not translate to price gains, he added.

"Most buyers will be 'opportunity buyers' who will buy a flat after a long wait (and prices have fallen)."

Madam Linda Ang, 38, for instance, has heard from only "one or two" interested buyers in the last month.

"This whole year is quite stagnant, so I don't expect many calls," said the clerk, who is selling a four-roomer in Woodlands.

But she, too, expects things to pick up next year. "It can't be going down all the way."

Public deserves reliable, consistent data

THE computation of the HDB's resale price index has recently been improved to give a more accurate picture of price movements in the public housing market ("New way to better reflect HDB resale market"; Dec 10).

In contrast, there are different property price indexes tracking the private residential market - including the Urban Redevelopment Authority's non-landed residential Property Price Index (PPI), the SRX Property Index (SPI), the NUS Singapore Residential Price Index, and Redas' Real Estate Sentiment Index - with each one claiming to be more accurate than the others.

The conflicting results from the monthly and quarterly property performance reports released by these organisations confuse the public. For instance, there were at least seven quarters of conflicting price signals between the PPI and SPI from 2008 till now.

Also, the private home transaction data is incomplete owing to the following loopholes:

- Lodging caveats with the Singapore Land Authority is voluntary.

- Developers are not required to submit sales data of their delicensed projects after obtaining the Temporary Occupation Permit.

- All incentives from developers - including stamp duties, cash rebates and rental guarantees - for new projects are not captured, thus inflating the transacted prices of new sales.

The inflated prices in turn serve as a biased reference for valuation of similar properties. Thus, buyers risk taking bigger housing loans from banks and servicing mortgages higher than the actual market values of their properties.

This defeats the Government's intentions of ensuring financial prudence among borrowers and maintaining a sustainable property market.

The conflicting indexes make it difficult for the public to get a real picture of the latest market situation.

The market confidence of buyers and sellers is influenced by the announcement of property sales data and price indexes, affecting their bargaining during negotiations and their final decision to buy/sell their properties.

The Government also needs a reliable and consistent private property index that it can monitor closely in order to identify a "meaningful correction" before revising property cooling measures.

Upgrading to a condominium is the dream of many Singaporeans. To many, it is the most expensive purchase in their lives. They deserve more complete, transparent, accurate and consistent data concerning private residential sales in Singapore.

Vina Ip (Ms)
ST Forum, 18 Dec 2014

URA index shows broad price trends in private home market

WE THANK Ms Vina Ip for her letter ("Public deserves reliable, consistent data"; last Thursday).

The Urban Redevelopment Authority's Property Price Index (PPI) provides the public with a broad indication of price trends in the private residential market. The index covers the entire private housing market, including uncompleted and landed properties.

In contrast, the other property price indices tracking the private housing market have different coverage and methodologies. Hence, the resulting price changes may vary.

To compute the PPI, we use data from caveats lodged with the Singapore Land Authority for sub-sales and resales. For new sale transactions, we have complete data on property prices from a regular survey of developers. All discounts and rebates provided by developers are deducted to derive the nett prices.

Besides the PPI, prospective home buyers can view the transaction prices of individual private homes on our website.

We are also working towards releasing the nett prices of individual units sold by developers on our website in the first half of next year.

We assure Ms Ip that we will continue to make improvements to our property market data.

Sin Lye Chong
Group Director, Land Sales and Administration
Urban Redevelopment Authority
ST Forum, 23 Dec 2014

Homebuyers to gain from fuller price disclosures
Thumbs up for move to release net prices of individual units in projects
By Rennie Whang, The Straits Times, 25 Dec 2014

THE upcoming move to disclose the net prices of individual units sold by developers will give buyers, property firms and policymakers a more accurate snapshot of the market, said experts yesterday.

The change, which was mentioned on Tuesday by the Urban Redevelopment Authority (URA) in a Straits Times Forum letter, will kick in during the first half of next year.

It will fundamentally alter the system in place now, which leaves buyers relying on prices quoted by developers and caveats filed with the Singapore Land Authority for a sense of what a unit is worth.

The URA has been releasing information on developer sales each month, including the median, lowest and highest net prices at each project.

While these give buyers a sense of what units in a project are worth, they will be armed with far more information once the URA releases net prices of individual units on its website, experts said.

Caveats, which are submitted by a buyer's lawyer, may not paint the full picture. They are typically based on the price in the sales and purchase agreement and may have not have factored in indirect discounts.

These can include a developer absorbing the additional buyer's stamp duty or handing out furniture vouchers, said Mr Lee Liat Yeang, a partner at law firm Rodyk & Davidson.

Such indirect discounts have become increasingly common in today's soft market.

"Developers may also prefer not openly cutting prices, as this would upset earlier buyers," said Mr Lee.

This means prices in caveats could be slightly inflated now, said SLP International executive director Nicholas Mak.

"The provision of net prices gives buyers an extra tool for negotiating. A developer now can't cite the value of a previous transaction as x dollars, when it isn't actually a net of those discounts," he said.

More detailed numbers would also help consultants and developers in studying the market, said Savills Singapore research head Alan Cheong, adding: "There could be certain patterns that broad numbers don't tell us."

The disclosures of net prices of individual units will not apply to projects after they have been de-licensed. This typically occurs a year after a project's temporary occupation permit has been obtained. The disclosures will apply only to new sales.

The change is good news to home owner and investor Mark Yap, 44. "It's more transparent for consumers and is the type of information we would like to know. For example, looking at how much an eighth-floor unit sold at, we can now decide how much more we are willing to pay for a ninth- floor unit," he said.

Related

Revision of HDB Resale Price Index (RPI)

HDB Resale Price Index (RPI)