Last Wednesday, the Institute of Real Estate Studies at the National University of Singapore (NUS) announced that it had formulated an index called the Singapore Residential Price Index (SRPI).
It tracks prices of completed private non-landed homes month on month and will provide owners, investors, banks and property watchers with another source of price data.
Property experts have commented that it will be a more timely index than the quarterly one put out by the Urban Redevelopment Authority (URA).
The SRPI can serve as a reference index that will help expand the suite of property-based financial products, such as property derivatives.
The index is based on the transacted prices of a selected basket that broadly represents the target market. Therefore, landed homes, projects that are more than a decade old, and those that are small, rarely traded or targeted for collective sales, are excluded.
The basket will change every two years to reflect changes in the completed stock of private non-landed homes.
Its initial make-up comprises 74,359 units in 364 projects across 26 postal districts, completed between October 1998 and September last year.
Also, the SRPI takes into account the address, completion date, tenure, leasehold maturity, floor level and strata area of all units in the completed projects in this basket.
The URA property price index, on the other hand, is designed to provide the general public and industry players with a broad indication of price trends in the private residential market, a URA spokesman said.
It is thus compiled based on all types of transactions (that is, new sales, sub-sales and resales) and covers both landed and non-landed private homes.
Also, the URA releases price indices for both non-landed and landed properties.
In particular, URA’s index includes prices of uncompleted units sold by developers and sub-sales. Such transactions account for about half of all transactions, said the spokesman.
The SRPI has only two sub-indices by region – central and non-central areas.
Already, its flash data for January showed a rise in prices that month.
The data shows that resale prices in the non-central regions have now exceeded the previous high in January 2008 by 4.5 per cent.
However, the prices for the central region are still about 10 per cent below the previous peak.
Associate Professor Lum Sau Kim, who led the NUS project, said one key feature of the SRPI is that it will not be unduly influenced by small numbers of transactions in a quiet market.
The impact of one-off extremely high or low prices will also be dampened, she said.
Knight Frank chairman Tan Tiong Cheng said: ‘Now we have a very clear, transparent and timely index. The lag period is only one month. The main difference is that the URA indices are computed based on the moving average of the value of transactions over the last 12 quarters, so there’s a greater lag effect.’
Besides the timing, Cushman & Wakefield managing director Donald Han pointed out that the SRPI should provide a more accurate picture as its basket does not include new launches. These are typically priced higher than the market and may not reflect the state of the overall market.
Mr Simon Cheong, president of the Real Estate Developers’ Association of Singapore, said at the launch of the index that an index like the SRPI, computed based on the market value of a fixed reference basket of properties over time, ‘can better reflect the actual movement in price’.
‘We are all well aware of how, for example, the current proliferation of ‘micro apartments’ can distort the picture and send a wrong signal to the market when only median prices of all transactions are tracked and reported,’ he said.
This is because these micro units, which can be 500 sq ft or less, are sold at a higher per sq ft price. As prices rise, units shrink to keep the total quantum price at an affordable level.
The index, updated on the 28th of every month, is available at www.ires.nus.edu.sg/srpi.aspx
Source: Sunday Times, 28 Mar 2010