RES exam question on Real Estate Market: property market structure
Consider the following statements about Singapore's property market structure: (i) Property prices adjust instantaneously to new market information, similar to an efficient financial market. (ii) Singapore's property market is characterised by heterogeneity — each property is unique in location, size and condition. (iii) Property transactions are relatively infrequent compared to stock market trades, resulting in lower market liquidity. (iv) High transaction costs (stamp duties, legal fees, agent commissions) contribute to market friction in the property market. Which statements are CORRECT?
- A(ii), (iii) and (iv) only
- B(i), (ii) and (iii) only
- C(i), (ii), (iii) and (iv)
- D(i), (iii) and (iv) only
Show answer & explanation
Answer
A. (ii), (iii) and (iv) only
Explanation
Statements (ii), (iii) and (iv) are correct characteristics of Singapore's property market. Heterogeneity (ii) means no two properties are identical. Low liquidity (iii) arises from infrequent, high-value transactions. High transaction costs (iv) create market friction. Unlike financial markets, property markets are characterised by information asymmetry, search costs and slow price discovery, making them inherently inefficient.
Why the other options are wrong
- Statement (i) is INCORRECT — property markets do NOT exhibit instantaneous price adjustment to information.
Study the concept behind this question: The Property Market & Government Intervention (Singapore)
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