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Dangerous ideas about property market can turn out to be falsehoods
By Alan Cheong / Savills, The Edge Property | November 23, 2015 3:00 PM MYT
Tags: Property MarketDow Jones Industrial AverageHK residential pricesGDPCBDoffices
Having been an observer of the Singapore property market since the early 1990s, I can’t help but notice a cycle of repetition in the way analysis is done. As the various sectors of our real estate market are either facing challenges or at inflexion points, we can expect to see a repeat of storylines from previous cycles. This article looks at some of the common approaches taken by market watchers when making predictions and at why these can turn out to be an analysis of falsehoods.



Drawing parallels

It has been a common practice in the commercial world to draw parallels between past and present. Owing to its simplicity, very often, market observers use symmetry to back their position. Very often, they superimpose the current price pattern onto a historical price pattern where a cataclysmic event happened thereafter. The audience is then left to draw the conclusion that history is likely to repeat itself. Using the US stock market to illustrate this point, Chart 1 shows how the Dow Jones Industrial Average in the 2012-2014 period closely mirrored that of the 1928-1929 period. The reader is likely to conclude that the Dow will crash in the second half of 2014.



Chart 1

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