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New ways to measure property prices

Changes are on the way for the various price indices that are used to measure Singapore's real estate markets.

One big surprise for many people, including those in the industry, was that some estates are not included in the current Housing Board resale price index.

The Housing Development Board (HDB) has also said it will not recalculate old values of the resale price index to avoid confusion. That's actually confusing. Don't you need comparable past values in order to discern trends? It would also be helpful to compare past values using the old methodology versus the new methodology, to understand the impact of the new method.

So just what is the new method that will be used? HDB will be using a stratified hedonic method, which is just another way to say that the new index will control for "quality" characteristics such as the unit's storey. Eurostat has a nice booklet talking about the methodology. Awesome bedside reading.

An interesting note from the publication is that the starting variables and choices made in constructing a stratified hedonic index are crucial. A comprehensive disclosure and explanation of those choices and assumptions would go a long way toward improving the understanding and use of the index.

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