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An exclusive indices by SISV for suburban condos tracking

An exclusive indices by SISV for suburban condos tracking.

Joining the bandwagon of index providers tracking residential price movements here, the Singapore Institute of Surveyors and Valuers (SISV) has come up with an index series to track resale transactions of completed condominiums in the suburban region.

Based on this index suite, average prices in the East and West regions have softened to levels last seen five years ago, while average prices in the North and North-East are generally still higher than in 2011, SISV said.

This index suite tracks a basket of suburban condominium projects that have been most actively transacted in the last five years to derive an average per square foot (psf) pricing for each of the four suburban planning region.

This index series was launched on Wednesday at the Singapore Realtors Conference 2016. There are several other indices in the market that track residential prices here.

But SISV's index methodology, which does not make any adjustments for the heterogenous attributes of properties being transacted each quarter, has piqued some industry players, who flagged potential swings in the index arising from different types of properties being transacted across periods.

Property consultants noted that besides location, the psf pricing of condominiums is also susceptible to differences in size, height, facing and tenure.

For instance, if there are more properties transacted on a high floor in one quarter and more on the lower floors in the next quarter, that may result in a quarter-on-quarter fall in psf pricing.

Also, given Singapore's small market size and the relative illiquid nature of property transactions as opposed to stocks, analysts questioned the need for so many indices for one asset class.

Consumers could be confused by the different results of the different price indices, one of them said.

While it is always good to have additional references, the question is how to get consumers to understand what the index means. So for now, it may add more confusion while the market tries to understand it, he added.

SISV will be the fourth institution to come up with price indices for the private residential market, after government agency Urban Redevelopment Authority (URA), and private-sector players SRX Property and the Institute of Real Estate Studies at the National University of Singapore (NUS).

But those preceding institutions do apply "hedonic regression" in their indices to account for fine differences in the attributes of units such as their size, age, floor level and even micro-location factors such as proximity to MRT stations.

Explaining the rationale of the index to industry practitioners on Wednesday, SISV president (valuation and general practice) Lim Lan Yuan said: "The purpose is to provide an easy-to-understand price level of the residential suburban market, and enable potential investors and buyers to track the price direction and movement in order to make their decisions in investment."

He added that more than 80 per cent of Singapore's resident population reside in suburban areas, where there will be exciting developments given the Jurong Lake District development with the future High Speed Rail terminus, proposed park connector network islandwide, improved infrastructure and new MRT stations.

"Home buyers and investors are interested to understand the market outside central Singapore and would like to have more details and up-to-date information in these areas," said Dr Lim, who is also associate professor at the NUS School of Design & Environment.

According to SISV secretariat Teo Li Kim, the index is "not designed as a predictive or forecasting tool" but is meant to inform investors of price movements on a quarterly basis. The time series start from Q1 2011. SISV will review the baskets it tracks every six months.

Based on the SISV indices, prices peaked in Q1 2014 in the East, in Q1 2012 in the North, and in Q2 2013 in the West and North-east.

In comparison, the non-landed private residential price index for the Outside Central Region (OCR) published by URA - which includes both completed and uncompleted homes - peaked in Q3 2013.

URA used to have a price index that tracks completed non-landed residential properties in the OCR, which had also hit a peak in Q3 2013, but this sub-index was among other sub-indices that were discontinued when it streamlined the number of price indices at the same time the methodology behind its price indices was revised from Q1 2015.

The rationale then was that property price indices were intended to show broad price trends rather than detailed property price movements at a micro or localised level.

Adapted from: The Business Times, 4 August 2016