The latest data from the Urban Redevelopment Authority show that the volume of real estate sales in April reached 1,200 transactions following impressive sales records two months before. From January to April, 3,867 units were sold, which were equivalent to 90 percent of total sales in 2008 at 4,382 units. But sales in April, unlike those of the preceding months, encompassed various property sectors, suggesting an industry-wide recovery.
Despite these positive figures, the government lowered its GDP forecast, unemployment rate increased, and exports fell. The macroeconomic indicators remain weak, yet the property market shows no signs of slowing down, even outperforming the overall stock index last week.
Several economists believe that real estate buyers are just taking advantage of low prices. It has been reported that the market would see an oversupply of new houses in 2010 as buyers act on positive forecasts. Property buyers are looking forward to reap good returns when the economy recovers in 2010 as predicted, and they don’t mind keeping an idle property if the recovery comes later than expected.
Another driving force behind the robust sales could be the significant differential between fixed deposit rates and returns from property investments. As deposit rates hit a five-year low amid declining deflationary pressure, investors are prompted to withdraw their savings to invest on real estate.
The divergent trends seen in the real estate market and the economy at large warrant close examination. Understanding the behavior of the property market during recession would help improve market function and investment decisions.