How Accurate Are Analysts in Predicting the Future Of Singapore’s Property Market?

Did Anyone Do A Study To Understand How Accurate Analysts Are?

I am sure that you have come across articles in mainstream media featuring analysts giving their views on the property market. Just how accurate are these analysts? Do they get it right all the time? Or is flipping a coin more accurate than these predictions? Well, let us find out!

Analysts Prediction Back In April 2020

Back in 2nd April 2020, there was an article in the business times with a prediction that there will be a full-year drop of up to 8% in private home prices. In other words, if you wait long enough until the end of the year, your $1mil condo will now be available for you to grab at a mere $920k. Besides, these analysts also predicted that the developer sales volume for 2020 would be around 20 to 30% lower than of 2019. If you convert that into numbers, the sales for this year should work out to be about 6938 to 7929 units.

Analysts predict up to 8% full-year drop in private home prices—source: Business Times.

We are now in August 2020 with another four and a half months to go. We do not have all the statistics yet to make a year to year comparison. However, four months have passed, and we do have some numbers for comparison. Let us look and see how accurate the current data correlates to what the analysts have predicted in this article.

Price Prediction As of Now

First, let us look at the prices. The reason why these analysts came up with the 8% drop is mainly dependent on the URA’s property price index in 1Q 2020. The index fell by 1.0%, and the overall economy looks like it was going from bad to worse. As an analyst (or perhaps a normal human being), you would think that the 2nd, 3rd, and 4th quarter would be terrible and most likely be worse than the 1.2% drop of 1Q 2020. If this drop continues in the next few quarters, prices for real estate can only go in one direction.

Source URA. 1st Quarter 2020

However, URA just released the 2Q 2020 real estate statistics. Instead of dropping further, the index went up by 0.3%. I believe this number came as a surprise to these analysts because whatever prediction they came up with is now thrown out of the window. To give you a better perspective on the price movement, it is always better to look at the price index number instead of percentages. For example, back in 4Q 2019, the property price index was 153.6. The latest figure we have in 2Q 2020 is 152.6. In other words, the percentage drop in the index since last year was a mere 0.65%. With such a low percentage decrease, is it likely we will hit the 8% drop in prices?

Source URA. 2nd Quarter 2020

 

Source URA. 4th Quarter 2019

Volume Prediction As of Now

Second, the volume. Volume is always easy to check, head to my favourite website at Square Foot Research, and you can compile the numbers for yourself. Current volume for developer’s sales is around 5568. To reach the estimates of 7929, we need around another 2361 units to go. Or approximately 590 units per month for the rest of the year. Does this seem realistic? If the volume remains the same for June and July, this prediction again goes out of the window. However, if the sales for August and the rest of the year is tempered, this volume may be realistic.

Source: Square Foot Research. Volume Analysis for 2020

The Reason Why Analysts (Real Estate Or Otherwise) Do Not Get Things Right

This finding is not only exclusive to the real estate market. A similar study was done on stock market analysts to understand how accurate their prediction holds. This article on Nerdwallet shows us a remarkably fascinating fact. It appears that only 51% of them were correct in their recommendations. Instead of spending time to read their reports, it might make more sense for you to flip a coin, go out and enjoy the things you do and yet arrive at a similar outcome.

So, the question is this. Why do these analysts have such a low percentage in predicting future market trends? Well, the answer is simple. Nobody can predict the future. I am not talking about pandemics, protests, trade wars or another black swan event. What I am referring to is the predictability of consumer demand. To be able to predict price movement correctly, there is an assumption that consumer demand must remain consistent. However, for products such as stocks, shares, and housing, predicting demand can be extremely tricky. Once this highly unpredictable element goes against your projection, whatever prediction you have will not hold. You can be right a few times, but ultimately, the statistics will still go against you.

From a macro perspective, if the Singapore government can predict this demand accurately, why do we need so many cooling measures?

Why I Will Never Tell You That Today, Tomorrow Or Next Year Is A Good Time To Buy Properties

If you happen to read through all my articles, you will realise that I will never tell you when is a good time to buy properties. Nor will I ever make any predictions in the future with regards to specific price trends. Because by doing that, I will ultimately be proven wrong one day and my credibility goes down the drain. Instead, I always focus on sharing the attributes of specific condos and how these characteristics affect future price trends. There is always a consistent pattern you can draw to come up with a reliable conclusion. Like why new launch tends to appreciate better than resale condos despite having a higher price tag, the rationale behind why price increment for freehold properties tends to lag behind leasehold ones and the list goes on. If you need help in understanding this connection, feel free to let us know. Meanwhile, stay safe, do your research, take expert predictions with a pinch of salt, and always look at the numbers!

Article contributed by Jerry Wong.

Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos and has been in real estate for ten years. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home. Or making well-informed decisions that see their assets grow. Book a video call appointment and Jerry will share with you the following.

  1. How certain factors affect real estate prices. Why some condos can make a million dollars while others can lose that same million.
  2. Why timing is not the most important thing. Because some people can buy the same condo at the same time, but one end up making $100k to $200k while the other suffers losses of the same amount!
  3. Understanding your requirements and craft a solution for your real estate needs. Be it in the form of asset progression, tax planning, financial calculations, rentals, sales, etc.

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