The purpose of the dashboard is to define KPIs to measure the bubble degree of HDB resale market in Singapore. The dashboard covers the KPI from the following perspectives:
Q1. Price, trading volume and building age are three measurements in the first graph.
There are a few transaction records in the central area, though central area is considered as the most valuable places in Singapore. From centre to periphery, building age declines while trading volume increases. In addition, building age in periphery is much younger than that of the central area. We can deduce that Singapore government exploited new places to increase supply of houses because the demand keeps increasing. Even though it is far away from the centre, so many people still want to buy them. It signifies that resale HDB flats are still attractive for investors.
Q2. From 2013 to 2015, housing prices declined but volumes remained stable.
It means that people were less willing to buy HDB and the resale market became colder than before. Two policies, which were carried out in 2013, were highly related to the decline of prices. One is that additional buyer stamp duty was raised. Another is that new Singapore PR need to wait for 3 years before they are eligible to purchase resale HDB flats. In general, being stable is much better than having great changes in terms of housing property. Thus, we think the resale market is healthy because bubbles are not obvious now.
Q3. CPI is generally considered as an indicator to evaluate the inflation level and it is closely related to our daily life.
We can judge HDB resale market by making a comparison between CPI and growth rate. Prior to 2013, it is obvious that bubbles existed because growth rate was much higher than CPI. However, afterwards, it became better, we believe that current growth rate is reasonable. At least no significant bubbles.
Q4. We use a new measurement housing-price-to-income ratio to measure HDB resale market.
Based on international practice, the proper range of this ratio is between 3 and 6. If the ratio is higher than this, real estate bubble can be identified. When it comes to SG HDB resale market, this ratio remains around 4 during last 15 years.
During the global financial crisis period of 2008, rapid population increase, low interest rate, and high global liquidity contributed to the accelerated price increase of Singapore. However, from 2013, it declined, which means bubbles were forced out gradually.
Q5. The price-to-rent ratio is a well-established economic principle used for real estate valuation.
It is typically calculated by dividing the average list price by the average yearly rent price. At its most basic level, the price-to-rent ratio is a benchmark for understanding whether it is better to rent or buy a property. The ratio increased dramatically leading up to the 2008-2009 housing market crash. In retrospect, this was a red flag of a housing bubble. The cause of the rising price-to-rent ratio is not the increase of rental but the panic fall of housing price. In following years, the housing price gradually increased, but the rental market was relatively smooth and steady, that’s why the PR ratio fell. In summary, it indicates that Singapore HDB resale market still has potential because the rental yield is relatively high and PR ratio is rational.
Submitted by TANG ZE, ZHANG DONGXUE, JI YUNHE, ZHENG WEIYU, GAO RUOFEI