By Getty Goh (guest contributor)
This is my first article for 2012. Before getting down to business, I would like to take this opportunity to wish everyone a successful and prosperous 2012! To start off the year, I have decided to write something on a lighter note for your reading entertainment.
Some time back, I came across an article in the Singapore Business Times titled Finance, fengshui square off over this Dragon Year. This article wrote that experts in the finance industry and geomancy circle were having different outlooks for the Singapore stock market in the year of the Dragon. The former saw a slight recovery while the latter held an opposing view.
After reading the article, I thought that it would be interesting to see how the Singapore property markets had performed in previous Dragon Years and to use the past trends to “predict” what 2012 was going to be like.
Intuitively, it seemed plausible that the Chinese zodiac had some impact on the property markets. After all, the Dragon is a creature that is both feared and revered by the Chinese. Just as many Chinese parents want to have Dragon babies, I wanted to find out if there was a Dragon Year effect for the property markets as well?
Residential property market performance in the Dragon Year
Using the URA Private Property Price Index (PPPI) data from 1975 to 2011, a gain (or a loss) for the respective year was worked out by subtracting the index value of Quarter 1 from Quarter 4. If the difference was positive, that year would be deemed a “growth” year. Conversely, if the difference was negative, that year would be deemed a “contraction” year.
Based on this approach, the numbers of growth and contraction years, according to the Chinese zodiac animals, were worked out (see Figure 1).
Figure 1: Number of profitable and unprofitable years according to Chinese Zodiac for private residential properties (according to alphabetical order)
From the table above, 2 out of the 3 years Dragon Years were “contraction” years. From this analysis, some may infer that the residential property market is unlikely to perform well this year.
In comparison, the Dog, Monkey, Pig, Rabbit and Rooster seemed to be all favourable years for the private residential market. Hence, some investors might see some price appreciation if they were to enter the market then.
Industrial property market performance in the Dragon Year
What about the industrial property market? From Figure 2, we might say that Dragon Years bring good fortune to the industrial property sector. Apart from that, Monkey and Rooster Years also seemed to be auspicious times for industrial property owners.
On the other hand, the Ox and Rabbit Years seemed unfavourable for industrial properties and the industrial index dropped when those zodiac animals came around.
Figure 2: Number of profitable and unprofitable years according to Chinese Zodiac for industrial properties (according to alphabetical order)
Retail property market performance in previous Dragon Year
From Figure 3, 2 out of 3 years Dragon Years were found to be profitable. Hence, it might be inferred that the retail sector would be generally favourable in the year ahead. In comparison, the Rooster was the only zodiac animal that had 3 rounds of price increases and some might think that investors who bought retail units in such a year would likely do well.
Figure 3: Number of profitable and unprofitable years according to Chinese Zodiac for retail properties (according to alphabetical order)
To conclude, I must qualify that past performances are not indicative of future results. At present, there appears to be some congruence between how people expect the property market to perform and the past Dragon Years trend. To me, the distribution appears to be totally random and the congruence is simply by chance. To a soothsayer, this may actually be the work of divine forces. Ultimately, only time will tell whether the property market will pan out as “predicted”.
By guest contributor Getty Goh, Director of Ascendant Assets, a real estate research and investment consultancy firm.