The Resale Price Index (RPI) for HDB flats will be revised to reflect changing market conditions, said Minister for National Development Khaw Boon Wan in his blog Wednesday.
"To be effective and representative, RPI must reflect the prevailing resale market. In recent years, the HDB resale market has actually evolved considerably," he wrote.
He outlined three ways in which the resale market has changed in recent years.
"First, we now see a wider range of flats, differing in designs and attributes. For example, newer flat models, including taller blocks, are increasingly being transacted in the resale market. We have also reintroduced 3-room flats since 2004, after the current RPI was last revised," he wrote.
"Second, there are now a lot more resale transactions for flats in newer towns, such as Punggol, Sengkang and Sembawang, but these towns are not included in the representative basket currently. In other words, the current RPI does not capture movements in resale flat prices in these towns."
"Third, unlike the past, there is now greater variance in the age profile of flats being transacted in the resale market. Such variance must be taken into account in making price comparisons."
"With these significant changes in the HDB resale market, the current RPI may not adequately reflect the resale market. It is therefore timely to review the RPI methodology to better capture price changes over time, and control for the variations in attributes of the resale flats transacted. This will allow the index to continue serving its purpose of providing timely and reliable information on the resale market movements.
To construct the RPI, HDB takes the average resale flat prices for a representative basket, by flat types, flat models and region, based on actual resale flat transactions. The average resale flat prices for each segment are then aggregated to derive the index.
The resale index is released every quarter. It gives a general sense of resale price movements and serves as a useful reference point for home buyers and sellers in their decision-making.
Mr Khaw also said in his blog post that HDB has been working with a consultant from the NUS Department of Real Estate to review the RPI computation methodology. The review has recently been completed and HDB will be sharing more details soon, he aded.