URA index reflects overall price trends

Source : Business Times - 15 Aug 2008

We refer to the letter ‘URA private home index an anomaly’ by Kenneth Pang Cheow Jow (BT, Aug 5).

The writer asked why URA’s Private Residential Property Price Index (PPI) for second-quarter 2008 was still lower than its 1996 peak, when private residential property prices in Singapore were anecdotally at, or near, their highest.

We wish to inform your readers that the prices highlighted by Mr Pang pertain to selected uncompleted properties which recorded relatively higher prices. These were not representative of the entire private residential market.

For example, in June 2008, a number of uncompleted properties in the Core Central Region (CCR), where most high-end properties are located, recorded median prices of around $1,300-1,800 psf and prices as low as $1,100 psf. Similarly, a number of uncompleted properties in the Rest of Central Region (RCR), generally equated with mid-range properties, recorded median prices of around $800-1,300 psf and prices as low as $700 psf. In the Outside Central Region (OCR), which generally caters to the mass market, a number of uncompleted properties saw median prices of around $700-800 psf, with some prices as low as $600 psf.

Moreover, the anecdotes given by Mr Pang refer mainly to the prices for new sales of non-landed properties. In contrast, URA’s PPI takes into account both primary and secondary market transactions of all types of properties. Generally, the median prices of transactions in the secondary market as a whole, which represent about 50-60 per cent of all transactions, are lower than those found in the primary market.

As for landed properties, the prices in Q2 2008 in several areas were still lower than their peak in 1996. These include postal districts 14, 16, 17, 19, 21 and 28.

URA’s PPI for private residential properties, both island-wide and for the different market segments (that is, CCR, RCR and OCR), is compiled based on both primary and secondary market transactions for all types of properties. Hence the index gives a balanced picture of overall price trends in the private housing market.

To compute the PPI, transactions are first grouped by characteristics of the properties, including property type and locality, and the median price in each group is used to compute a sub-index. A system of weights based on the historical share of each group of the total transactions is then applied to the various sub-indices to compute the overall index.

We thank Mr Pang for his feedback.

Choy Chan Pong
Director
(Land Administration)
Urban Redevelopment Authority