Property cooling measures ineffective?

Not exactly... said Philip Loh in his letter published in the Forum page of our de facto English newspaper today.

Below is the full transcript:

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THE Singapore Real Estate Exchange (SRX) reported that resale suburban condominium prices rose by 5.1% last month ("Resale suburban condo prices rise"; March 9).

This gave the impression that suburban property prices had gone up by 5.1% when, in actual fact, prices may have softened a bit from January.

The SRX reports average per square foot (psf) figures, which depend a lot on the mix of properties transacted.

As the sales volume plunged for the general resale market (older private properties), the sub-sales of private properties that were still under construction, about to get their temporary occupation permit (TOP), or just received their TOP (new properties) will pull the average psf price up.

Also, the sizes of these sub-sales units are usually smaller, which will generally fetch higher psf prices.

The mix of private properties transacted is simply getting newer and smaller. Even if real actual prices were to remain the same, the SRX would still have reported higher average psf prices as long as the mix of transacted units was skewed towards the "newer" and "smaller" trend.

The more balanced Urban Redevelopment Authority (URA) private property index reported a price gain of 2.8% last year, down from the 5.9% gain the year before ("Prices of suburban condo units climb 3.4% on strong demand"; Jan 3).

The difference is that the URA index adjusts for the size and age of private properties transacted, whereas the SRX does not.

As the Housing Board does not build shoebox flats, and new flats can be sold on the resale market only after the five-year minimum occupation period, the SRX actually reported a drop in last month's HDB resale prices.

Sales volume was reported to have dropped sharply last month and developers' share prices plummeted as a result of the poor outlook.

All these, I believe, are more indicative of the true state of the Singapore property market now.
The SRX's reported average psf price is a misleading indicator of the health and price trend of the Singapore property market. As a result, many Singaporeans may feel that the Government's property cooling measures are ineffective when, in actual fact, they could be working very well.
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The wife and I appreciate the insight given by Mr Loh on the difference between the SRX and URA indices. And on the subject of price, we feel that as long as liquidity amongst potential home buyers remains high, private home prices will continue to rise, albeit at a slower pace given the latest set of cooling measures.