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Thread: Do people really understand property price indices?

  1. #1
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    Default Do people really understand property price indices?

    http://www.theedgeproperty.com.sg/co...-price-indices

    Do people really understand property price indices?

    By Alan Cheong / Savills, The Edge Property | October 26, 2015 9:27 AM MYT
    The rise and fall of prices is standard fare during casual conversations or discussions among intelligent- sia. In the case of stocks, when prices rise, the consumption of goods and services increases as discretionary spending increases. For property prices, the same happens. However, there is a distinction between stock and property markets and, therefore, between stock and property prices. To many, the distinction is that the former is a competitive market while the latter is an imperfect market. While this is true, there are also other differences between the two markets, one of which is the price behaviour of the constituents that make up the real estate sector. This difference has never been mentioned in daily conversations or by publications on commercial research.

    For starters, if one were to run simple statistical tests on whether quarterly price changes in the URA Private Residential Property Price Index (PPI) are random, the result shows that it is not so. This means that prices tend to go up and come down in a series of runs. On the other hand, stock price changes, whether on a daily, quarterly or some other periodic basis, behave randomly.

    Chart 1 shows that although both the URA PPI and FTSE ST Real Estate Index look rather similar optically, they are, in fact, different from a statistical standpoint. The directional change in prices in the former is not random, but for the latter, it is. This one difference in price behaviour between the two markets holds lots of information that thus far many appear to have overlooked.



    Chart 1



    Source: Savills, URA, Daiwa

    http://www.theedgeproperty.com.sg/co...-price-indices

  2. #2
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    Thanks. It's an enlightening view as well, related to some thoughts I recently have.

    Another area that I also thought seriously about is the stratified hedonistic index that URA is using. I have several questions about its computation. Are there ways to find details of URA's calculation of the PPI?



    Quote Originally Posted by Kevin Tan View Post
    http://www.theedgeproperty.com.sg/co...-price-indices

    Do people really understand property price indices?

    By Alan Cheong / Savills, The Edge Property | October 26, 2015 9:27 AM MYT
    The rise and fall of prices is standard fare during casual conversations or discussions among intelligent- sia. In the case of stocks, when prices rise, the consumption of goods and services increases as discretionary spending increases. For property prices, the same happens. However, there is a distinction between stock and property markets and, therefore, between stock and property prices. To many, the distinction is that the former is a competitive market while the latter is an imperfect market. While this is true, there are also other differences between the two markets, one of which is the price behaviour of the constituents that make up the real estate sector. This difference has never been mentioned in daily conversations or by publications on commercial research.

    For starters, if one were to run simple statistical tests on whether quarterly price changes in the URA Private Residential Property Price Index (PPI) are random, the result shows that it is not so. This means that prices tend to go up and come down in a series of runs. On the other hand, stock price changes, whether on a daily, quarterly or some other periodic basis, behave randomly.

    Chart 1 shows that although both the URA PPI and FTSE ST Real Estate Index look rather similar optically, they are, in fact, different from a statistical standpoint. The directional change in prices in the former is not random, but for the latter, it is. This one difference in price behaviour between the two markets holds lots of information that thus far many appear to have overlooked.



    Chart 1



    Source: Savills, URA, Daiwa

    http://www.theedgeproperty.com.sg/co...-price-indices
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    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  3. #3
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    Sep 2015
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    AFAIK URA does not share exact computation of the PPI

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