Written Answer by Ministry of National Development on divergence in price trends for private homes and HDB resale flats

Feb 11, 2019

Assoc Prof Daniel Goh Pei Siong: To ask the Minister for National Development 

a) whether the unusual divergence in price trends for private homes and HDB resale flats in 2018 is caused by concerns regarding leasehold decay and depreciation of ageing HDB flats; and

b) whether the divergence is a cause for concern if it is not arrested.

Answer:

The URA’s Property Price Index (PPI) captures all private housing transactions, including new sales (units sold by developers), resales and sub-sales; the HDB’s Resale Price Index (RPI) captures all HDB resale flat transactions.

Insofar as there are underlying factors that affect both the public and private property markets, the two indices would tend to move together.  But there have been instances of divergence in the PPI and RPI price trends.  This has happened in the past, and more recently between 2Q2017 and 3Q2018.  The recent divergence was largely due to euphoric sentiments in the private property market. This resulted in a sharp increase in private property prices over a very short duration.  This was not sustainable as prices were increasing well ahead of fundamentals. Hence the government had moved to introduce the last round of cooling measures in July last year.

The government will continue to monitor both the public and private property markets, and ensure they are stable and sustainable.