By Getty Goh (guest contributor)

You may have come across numerous media reports that talked about how well the primary property market did in January 2012.  Specifically, a media report cited that the total number of sales exceeded 2,000 in the month of January alone.  This came hot on the heels of Additional Buyers Stamp Duty (ABSD) that was implemented in early December 2011.

When ABSD was first introduced, many property analysts and researchers opined that the property market would be affected as a result of this.  Some analyst even thought that the market would crash by more than 20%.  Naturally, the news did not go unnoticed, when the reverse was reported to happen.

What is really happening?

To the casual reader, it may seem that many of these real estate analysts were overly pessimistic and the appetite for properties was hardly affected.  How else could we explain the strong property sales figures?  However, as the saying goes, the “devil lies in the details”.  To really find out what is going on, we should dig a bit deeper.

For those who are new to the real estate market, there are three types of property sale – new sale, subsale and resale.  Generally speaking, a new sale refers to someone buying an uncompleted property directly from a property developer.  Subsale refers to someone buying an uncompleted property from another property owner, while a resale is the purchase of a completed property from another property owner.

A check with URA revealed that the resale figure in January 2012 was only 329 while the subsale figure was only 67.  This meant that most of the market activity was limited to just one segment (the new sale) and it did not represent the general market sentiments.

Looking at the URA Private Property Price Index

To support the claim that the property market may not be as rosy as it looks, I have attached the chart below to present a different perspective.

From the table, we can see that the quarterly percentage change when the residential market first recovered in 2009Q3 was as high as 15.75%.  Overtime, the price increase gradually lost steam and the figure for the most recent quarter (2011Q4) was less than 1%.  Some may see this as a tipping point and it is likely that the index will start to dip moving forward.

Property investing is a matter of perspective. To those who have invested heavily, they may choose to believe that the high property volume is an indication of continuing market bullishness.   Conversely, those who are waiting for the market correction may opt to see the high volume as an anomalous event.  The jury is still out on who’s right and who’s wrong and only time will tell what the final verdict is.

By guest contributor Getty Goh, Director of Ascendant Assets, a real estate research and investment consultancy firm.

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