Turnovers and Housing Price Dynamics: Evidence from Singapore Condominium Market

Abstract

Recent real estate literature has not only proposed a few theories to explain the puzzling macro feature of the positive correlation between price and transaction volume, but also attempted to identify the causal relationships between them. However, there is little empirical evidence to explicitly illustrate how housing price dynamics measured by both past price changes and price volatility at housing unit level affect housing turnovers. Using a unique housing transaction database from Singapore condominium market, this paper reveals an interesting housing turnover pattern in response to past housing price dynamics. The results illustrate that the rise and fall of a dwelling's price can significantly affect housing turnovers in the same direction. Higher volatility reduces housing turnovers. The effects are stronger in the domain of losses and are weakening as the cumulative housing equity rises, implying that a seller withholds the sale in the downswing of a real estate cycle in the hope that the market will rebound. The findings offer some additional micro empirical evidence to the interactions between housing price and transaction volume and imply upwardly biased repeat sales indexes.

Keywords: housing turnovers, housing price dynamics, price volatility, value function

JEL Classification: C50, D12