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Real estate industry welcomes new property index for Singapore

The new Singapore Residential Price Index (SRPI) formulated by the Institute of Real Estate Studies at the National University of Singapore will track prices of completed private non-landed homes month on month and will provide owners, investors, banks and property watchers with a key source of price data.
Property experts believe that it will be a more useful and timely index than the quarterly one put out by the Urban Redevelopment Authority. It can also 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. It also 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 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 and includes prices of uncompleted units sold by developers and sub-sales. Such transactions account for about half of all transactions, said the spokesman.
The first indications for the new SRPI shows that prices increased in January and that resale prices in the non-central regions have now exceeded the previous high in January 2008 by 4.5%. However, the prices for the central region are still about 10%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.
The industry has welcomed the new index. ‘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,’ said Knight Frank chairman Tan Tiong Cheng.
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 which are typically priced higher than the market and may not reflect the state of the overall market.
Simon Cheong, president of the Real Estate Developers’ Association of Singapore, said it will better reflect the actual movement in price.