Behaviors of Flippers, Rental Housing Investors and Owner-Occupiers in the Singapore Private Housing Market

Abstract

We classify housing investors into flippers, rental housing investors and owner occupiers. We adopt the Singapore private housing transaction database between 2006 and 2010 to analyze their trading behaviors. The investigation period witnessed a full housing price cycle and had limited policy interventions. By comparing the trading behaviors of the three types of housing investors, we find that flippers can always buy at the highest price discounts and sell at the highest price premiums in housing transactions. Flippers show the highest propensity for trend chasing and act as momentum traders. When the housing market moves from its upward trend to a downward trend, flippers’ price discounts at buying increases, but their likelihood of buying decreases, while flippers’ price premiums at selling decrease, and their likelihood of selling increases. Rental housing investors show slightly higher price discounts at buying or price premiums at selling when trading with owner occupiers. However, they show a lower propensity for trend chasing than owner-occupiers. The findings have policy implications for anti-speculation policy designs.

Keywords:

• Housing
• behavior
• trend chasing
• mispricing

Notes

1 The proportions of the three types of housing investors are estimated based on the identification in this paper.

2 Public housing flats in Singapore are strictly regulated by the government to ensure that there is no housing flipping. More details about the Singapore housing market are provided in Appendix A1.

3 Remodeling is not allowed by the Singapore government. Private properties are highly homogeneous and well renovated by developers at presales or new sales. Singapore flippers are more interested in buying and selling presale and new properties to obtain capital gains (Fu & Qian, 2014; Fu et al., 2016).

4 Although selling with tenancy contract may add to the bargaining power of a rental housing investor, she is more likely to offer a price discount to cover the (imputed) rent loss of the prospective buyer.

5 REALIS is a database provided by the Urban Redevelopment Authority of the Singapore government, it has 100% of the private housing transaction records.

6 Note that the flippers are identified all based on the timing. We are not able to know whether a housing unit is held vacant, and a flipper buy a property with a tenant without breaking the lease.

7 Presales are the main form of new housing transactions in the Singapore private housing market. A subsale is the resale of a presale property, before the building obtains its temporary occupancy permit. In other words, a presale property is sold when the building is still under construction.

8 To further show the expected return of an investor (flipper, rental investor or owner occupier) through fetching price discount when buying from and then tapping price premium when selling to different types of investors, we reorganize the results from Column (1) of Table 4, and produce Table C2 and C3 in the Appendix C.

9 Mills et al. (2019) recognize the emergency of large firms as buy-to-rent housing investors and show that they support housing prices in the neighborhoods. Our paper departs from Mills et al. (2019) by identifying the individual buy-to-rent housing investors and add to understandings about their trading patterns and abilities.

Additional information

Funding

The work is supported by the National Natural Science Foundation of China #1 (Grant ID: 72004203); Singapore Ministry of Education Academic Research Fund (Grant ID: R-297-000-136-115); Fundamental Research Funds for the Provincial Universities of Zhejiang (Grant ID: GB201901002)