The Central Core Region of Singapore is currently the worst-performing in the private resale market, as our story ‘The Reality of the Resale Market’ earlier this week highlighted.
Using official government data PropertyGuru revealed that average private resale prices in the Core Central Region showed a dramatic double-digit 13.75 percent month-on-month decline.
Some
readers have since questioned the authenticity of this summary, and
have asked why this fact has not been reported by other Singapore media.
While PropertyGuru cannot answer the second point we are happy to clarify the first and illustrate the point in more detail.
In our Market Outlook 2014 eBook
we explained the importance of monitoring transaction volumes. They are
critical but often overlooked when measuring and forecasting trends in a
property market.
During 2013 the declining trend in transaction
volumes provided just such a ‘forward indicator’, with volumes serving
as a key market driver for prices in 2014.
The charts below look at the trends of both average resale prices and transaction levels.
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Put
simply, transaction volume trends usually precede and drive price
trends, and typically there is also a lag of around six months for this
to occur. This happens in most property markets around the world.
Hong
Kong provides a perfect illustration of the relationship between
transaction volumes and prices. In Hong Kong, volumes declined
significantly in mid-2013 but only some seven months later – in January
2014 – there was a double-digit market price decline.
Interestingly,
by the middle of 2013 some journalists were already confident enough –
based on the transaction data alone – to suggest that the drop in
transaction volumes signalled significant price declines to follow.
There are three relevant points for Singapore to note from this:
1) The
relationship between volume and pricing is a universal feature of
property markets; it is very likely that Singapore prices will be
affected by the same relationships in 2014.
2) The relationship is solid enough for commentators to use it confidently as a price predictor.
3) The ‘lag effect’ between volume and price changes is consistent, and in a range typically of between five to nine months.
So,
in the case of Singapore’s Core Central
Region, it is very likely that prices will still decline further going into 2014.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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If you have a property story you want us to publish email: andrew@propertyguru.com.sg