Transaction volumes can tell us a lot about the current activity and sentiment in the Singapore property market. In general, volume tends to pick up during bull markets and die down during bear markets.

How volumes are affected during bull and bear markets

We can see this quite clearly in Figure 1.1.2a, which looks at the Total Residential Sales Volume (in terms of number of units) on a quarterly basis. Transaction volume in the Singapore residential property market had a pronounced peak during 2007Q2 at just under 13,000 units, one quarter before the end of the Early Bull Market Phase in’s Property Market Cycle Model. Due to the Global Financial Crisis, volumes collapsed after 2007Q2 and hit a bottom in 2008Q4 at under 2,000 units, one quarter after the start of the Early Bear Market Phase.

Since then, residential property sales volume recovered quickly and remained at a high level from 2009 onwards, much higher than the average levels we saw from 2000 to 2006. As at 2012Q1, total residential sales volume was 6,377 units, comprising 4,154 developer sales and 2,223 secondary market sales.

Do note that all the volume data are obtained from the URA and based on caveats lodged by purchasers at the Singapore Land Registry. The numbers only provide an indication of the level of activity as not all purchasers lodge caveats for their transactions.

Primary versus Secondary Market Transactions

Figure 1.1.2b shows the Quarter-on-Quarter change in Residential Sales Volume split by whether they are Developer Sales (which we call Primary Sales as new units are sold firsthand to buyers) and Resale Market Sales (which we call Secondary Sales as they are sold secondhand from a buyer to another buyer).

We can see that Residential Sales Volumes are in general very volatile, and also that Developer Sales are in general more volatile than Secondary Sales. This is potentially because real estate developers have a greater ability versus individuals to time the market for their property launches. They also typically exhibit pro-cyclical behaviour, which is to say that when the market for new units is hot they will all crowd in and try to launch as many units as possible.

As of 2012Q1, versus the previous quarter, total residential sales had risen by just 0.2%, with developer sales increasing 36.9% and secondary sales falling by 33.3%.

Figure 1.1.2c shows the quarterly Composition of Residential Sales Volume by the type of sale. The green bars show the Secondary Sales. The red bars show the sale of uncompleted units by developers. The blue bars show the sale of completed units by developers.

From the graph we can observe a few phenomena. First, from 2000 to 2005 developers were still digesting a lot of their inventory (completed units) and this probably kept both the market and their new launches fairly depressed. The digestion of this inventory likely helped the property bull market to really take off from 2006 onwards. Second, Secondary Sales have been shrinking as a percentage of total sales volume versus Developer Sales over this period (i.e. the green bars are shrinking while the red bars have been growing).

As of 2012Q1, the proportion of developer sales to total sales was 65.1% while secondary sales made up 34.9%.

Figure 1.1.2d shows this shift clearly. The 12-year average for Developer Sales as a percentage of Total Sales is around 30%, but in 2012Q1 it hit an all time high of 65.1%.

Correspondingly, Secondary Market Sales as a percentage of Total Sales have plunged from their 12-year average of around 70% to an all-time low of 34.9% in 2012Q1 (Figure 1.1.2e).

Let’s take a look at the situation since 1Q2012. In May 2012, the estimated total residential transaction volume was 3,475 units, comprising 2,057 developer and 1,418 secondary market sales (Figure 1.1.2f). Developer sales were 59.2% of total sales, remaining at a relatively high level. The total, developer and secondary market sales were down 19.0%, 23.0% and 12.4% respectively on a month-on-month basis.

How these trends affect investors

Lower volumes suggest that the property market is cooling off, but we will need to see at least a few months’ worth of data to establish a trend. The dominance of developer sales and drying up of the resale market presents a double challenge to investors.

Firstly, currently new property launches tend to be unattractively priced versus their surrounding resale projects (a phenomenon we will explore in greater detail in a later article), thus reducing the prospect for future capital appreciation and increasing the risk of capital loss.

Secondly, a shrinking resale market means that investors will find it more difficult to sell off their purchased property, i.e. have less liquidity. This could also negatively affect the transacted pricing.

And given that we are currently in the Late Bull Market Phase of the Property Market Cycle Model, investors should be doubly cautious when looking to make a property purchase.

By Mr. Propwise for, a Singapore property market research site that helps buyers and sellers make profitable investment decisions – subscribers get updates on where we are in the Property Market Cycle Model to help you time your investments.

Join Our Weekly Newsletter

“What you must know before buying Singapore property…”

Sign up to get our free weekly newsletter with the best ideas and market updates from Singapore property experts, property transaction data and deals. Enter your email below to get our FREE Beginner's Guide and Property Buyer’s Checklist as a bonus. Save yourself thousands of dollars and lots of heartache!

Thanks for signing up! Please check your email to download your reports.