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Quick take: After 14 years, URA's property index revision is timely: ERA
EARLY Wednesday, the Urban Redevelopment Authority (URA) said it has revised its index methodology and expanded its data coverage to capture all private home transactions.
The revised approach for its Property Price Index (PPI) maximises the use of data and is better able to distill a wide range of property attributes to measure a pure change in price.
Below are ERA's comments:
After 14 years, the revision is timely. By leveraging on improved computation methodology, the PPI gives a mathematically more accurate reflection of changes in property market prices, as the stratified hedonic regression method can better account for variations in the attributes such as age and unit size.
Also, the change in base year to 1Q 2009 aligns the PPI with that of the HDB resale price index which had also changed its base year to 1Q 2009. This enables more meaningful comparison of private and HDB prices.
The most significant improvement in the accuracy of the PPI is that it is supplemented by stamp duty data from IRAS, which is a vast improvement compared to just depending on caveat data. This is because not all buyers lodge caveats. By using stamp duty data, essentially all property transactions are captured to compute the PPI.
With this improvement of the PPI, what is important to note is that the overall shape of the price index graph has not been changed. We still see the peaks and troughs as per the previous index.
For academics and analysts, this is of course a more accurate representation of market direction, taking into account what has been transacted. To them, it is just like the water has been made purer.
To the layman, it does not really make a difference. They will look at the index for the general market direction.
For pricing indication, most of them will be looking at the recent transaction information that URA publishes on its website, which is more relevant when it comes to pricing a property to be sold or making an offer on a flat to be purchased.
All in all, the revision is timely as the last revision was done in 2000, and many changes have taken place.