INVESTMENT PERSPECTIVE OF SINGAPORE'S PRIVATE RESIDENTIAL MARKET

Abstract

Presently, overall private residential property prices in Singapore have been steadily increasing, and have reached an all-time high since the property bubble in 1996. Despite the persistent introduction of repeated rounds of cooling measures, the market remained strong. This indicates that there exist a healthy number of buyers and investors intending to purchase private residential properties. This study strives to provide investors with a more thorough understanding of the market, so that they can make effective investment decisions. The private residential market is analysed in both the time domain and frequency domain perspective. In the time domain, the risk-return and risk-adjusted profile (mean, standard deviation, Sharpe’s Ratio, Jensen Index etc.) of each private housing-type is analysed individually, and as a whole in a portfolio. Correlations between housing-types are also computed to determine the diversification potential in the market. In the frequency domain, spectral techniques are used to ascertain the extent to which the housing-types are related. The results suggest that detached houses offered the greatest returns at the greatest risk on both a risk-adjusted and unadjusted basis. Hence, detached housing-types are suitable for investors with a risk-taking appetite. Risk-adverse investors however, can look to condominium sub-types or the non-landed market, as these proved to be the best performing in terms of risk. Both time and frequency domain results also revealed that there is little diversification potential in the local residential market. Thus, perhaps investors should look to other markets i.e. retail, commercial, office, if they wish to diversify their portfolios.