A NEW SENTIMENT INDEX, INCLUDING THE USE OF GOOGLE TRENDS DATA, AND ITS SIGNIFICANCE TO PROPERTY PRICES, FOR PRIVATE NON-LANDED RESIDENTIAL MARKET IN SINGAPORE

Abstract

This paper aims to compensate for the limitations of the current Real Estate Sentiment Index (RESI) with a supplementary measurement of sentiment. It utilizes empirical data to identify current sentiment via proxy indicators. A New Sentiment Index (NSI) is crafted, evaluated and used to project the influence of current sentiment on future prices, for Singapore’ private non-landed residential property market. The NSI is constructed based on proxy indicators derived from transaction data. Trend comparison and data analysis against the SRX Property Price Index (SPI) of private nonlanded residential properties are carried out, emulating the relationship between sentiment and price. Four determinants of sentiment are identified, foreign capital inflow, liquidity, take-up rate, and information flow. Six proxy indicators are formulated to represent these determinants. Based on the analysis conducted, this study has identified five out of the six to be statistically significant to sentiment, eliminating foreign capital inflow. The data from Google Trends is found to be statistically significant within a 95% confidence interval, as a representation of Information Flow. Findings show sentiment to be a close fit to price; impacting prices after a four to fivemonth reaction time. Past and current sentiment portray a downward trend, negatively influencing the future prices. However, sentiment is seen to be stabilizing over recent years.