Sales Volume versus Price: Which is a better indication?

If you have been following the market, you would have heard that the real estate industry is getting quieter and quieter. Paling in comparison to the heyday prices of 2009 and 2010, when the...

Admin @Locally.sg 23-Nov-2018

Sales Volume versus Price: Which is a better indication?

If you have been following the market, you would have heard that the real estate industry is getting quieter and quieter. Paling in comparison to the heyday prices of 2009 and 2010, when the market was burning red hot, the first quarter of 2016 saw Singapore property prices dip for the 10th straight quarter, for both private and public housing alike.

With the sales market expected to head south even further (albeit at a slower rate), many current investors and owners are holding on to their property, and waiting for the next wave; i.e. when prices rise again.

All these news certainly make the market sound quite bleak. However, when it comes to sales, it is important to bear in mind that there are two important indicators to look at: price and volume.

Whilst sales prices have certainly been dropping, March 2016 saw a 37.6% jump in HDB resale transactions, compared to the previous month. In comparison to March 2015, the 1,651 resale flats sold in March 2016 was a 22.5% increase.

Also, in the first quarter of 2016, according to Cushman & Wakefield, residential volume was the highest since 4Q2014 levels, at $1.63 billion, even though the private property price index fell by 0.7 percentage points.

So, what do all these numbers and statistics tell us? Firstly, we see that (as expected) prices are still affected by cooling measures and an overall slower market. However, the drop in prices has started to ease. According to this Straits Times article, even though the fall in prices eased a little for the first quarter of 2016, there was still a decline in overall housing prices, with HDB flat prices seeing a dip of 0.1 percent, while private home prices dropped by 0.7 percent.

Moreover, based on sales volumes, we can see that the market is still rather healthy. With many private projects expected to be completed later this year, it can be expected that the resultant change of hands (from HDB upgraders selling their homes when they move to private property) will continue to help buoy up sales volumes in the later part of the year).

So, coming back to the question of which indicator to look at, it really depends on your objectives. If you are a property agent, or considering whether to join the industry to be a property agent, then perhaps you might be heartened to know that there are still transactions and sales to be closed. However, of course, one cannot expect prices to reach the peak levels of 2013.

Perhaps the key word to keep in mind is pragmatism. One of the possible reasons for the high prices during the previous property market surge was price speculation. The surge in housing demand also drove prices up to such a level that, till now, even with cooling measures in place, prices are still elevated beyond the pre-2010 levels (See charts below).

If you are an property investor or looking to invest, then perhaps you might want to wait for prices to drop a little further before buying. For sellers, although cashing out now will not get you 2013 level prices, the returns are still higher compared to 2009-2010 levels. One alternative would be to hold on to your property, and rent it out for passive income and selling only when the market picks up later on.

On that note, it is probably worthwhile to note that for the next year at least, prices will either continue falling or stabilise and peter out. However, seeing as the government’s aim is to stabilise the market and not stop it totally, a rise can be foreseen in the future, when the governments reverses the cooling measures.

To conclude, the key thing is to not be too easily swayed by numbers or hearsay. Study the market, work hard, and you will see results regardless of the market outlook.