RES exam question on Real Estate Market: An investor who trades shares wants to move into property and expects it to work…
An investor who trades shares wants to move into property and expects it to work the same way: identical units, instant pricing and an easy exit. Which is/are correct? (i) No two properties are identical in location, tenure or attributes, so a buyer cannot price one simply by reading the last transaction. (ii) Property is illiquid next to shares: a sale takes weeks or months, and a seller in a hurry usually pays for that in price. (iii) Information is imperfect and unevenly held, which is why buyers lean on agents, valuers and caveat records rather than a live price feed. (iv) Supply is fixed in the short run, so a surge in demand shows up in prices well before it shows up in completions.
- A(i), (ii), (iii) and (iv)
- B(i) and (ii) only
- C(ii), (iii) and (iv) only
- D(i), (iii) and (iv) only
Show answer & explanation
Answer
A. (i), (ii), (iii) and (iv)
Explanation
Issue: how the property market departs from the textbook perfect market. Rule: real estate is heterogeneous, immobile, illiquid and traded on imperfect information, and supply cannot respond quickly because land takes years to develop; each feature pushes it further from perfect competition and produces distinct submarkets rather than one island-wide price. Application: every statement holds, which is the point — the investor's model fails on all four counts, and the last explains why a demand shock moves price first and volume later. Conclusion: (i), (ii), (iii) and (iv) are correct.
Study the concept behind this question: The Property Market & Government Intervention (Singapore)
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