CONSTRUCTION OF JTC INDUSTRIAL PROPERTY PRICE INDEXES 1994-2003

Abstract

Indexes, especially in real estate property market, are deemed to be widely recognized as the barometers and performance indicators for the measurement of the property market movement. However, despite its importance, there is a dearth of index construction methodologies especially in relation to industrial property in Singapore with particular reference to Jurong Town Corporation (JTC) Industrial Property. In Singapore context, the only publicly available price indices are those published by the Urban Redevelopment Authority (URA) which is on median price indices based on the fixed base weighted Laspeyres formula. This study attempts to investigate the usefulness of the URA Industrial Price Index and construct an industrial price index for Singapore focusing on the JTC Industrial Property price movement with particular reference to JTC Standard Factory. The study will also examine the various types and configuration of JTC Standard Factory and determine whether there is a necessity and scope for further segmentation and introduction of various sub-indexes for the measurement of the various types of JTC Standard Factory. For this study, the indexes is constructed using the fixed based Laspeyres method of index construction with median and mean transaction prices as well as hedonic regression based model. The proposed transaction-based hedonic index takes into accounts the effect of changing quality and characteristics of JTC Industrial Properties over time. The different parameters that may influence the sale price of an industrial property with emphasis on standard factory are identified and tested for its significance. Analysis is carried out to observe the changing effect of the quality and characteristics of the industrial property and its degree of impact on the price movement. The hedonic price index is also compared with the URA industrial Property Price Index. A comparison between the newly constructed Hedonic Price Index and the URA Industrial Property Price Index has revealed that the URA Industrial Property Price Index is not a good performance indicator and barometer for the measurement of the price movement of JTC Industrial (Standard Factory) Property. The result of this study clearly exhibited that the Hedonic Price Index is a better indicator as compared to the URA Price Index and is more reflective of pure price change. It have also revealed that the parameters such as Gross Floor Area (GFA), Factory Type and Remaining Tenure are the main contributing factors in influencing the sale price of JTC Industrial (Standard Factory) Property. Based on the findings, it has also been concluded that due to the limited availability of the market transaction data of the various types of standard factories, there is no necessity to introduce new sub-indexes for the measurement of the various types of JTC Standard Factory. The objectives of this study are thus fulfilled as a more accurate price index is constructed and the significance of the parameters that are included in the hedonic equations are tested and determined.