The inspiration for this research is two-fold: First being the intense media
attention accorded to the property sector throughout 1993, especially the
mind-boggling prices of real estate transactions; and the second being
what appears to be a spiralling rise in property stock prices. The motivation
is to attempt to gauge the property sector performance via a more
focused approach-namely, an empirical survey of property stock performance
on the Stock Exchange of Singapore (SES). The most intriguing
question in mind has been: To what extent does boom or gloom prevail
in the property sector?
A study is made on the performance of the SES All-Property Index
and 4 selected property stocks (viz ., DBS Land Ltd., UOL Ltd ., Malayan Credit Ltd. and City Developments Ltd.) relative to the SES
All-Singapore Index-the market surrogate. Investigation spans 15.5 years
from January 1978-June 1993, partitioned into 3 shorter sub-periods
(1978-1982, 1983-1987, 1988-June 1993) for scrutiny. In particular,
the most current sub-period will be the period of focus for the 4 property
stocks reviewed.
The methodology involves regression analysis of relevant share indices
and adjusted share prices, results of which are used in computing 3
risk-adjusted performance measures: the Jensen, Treynor and
Sharpe Indices.
The main regression of 15.5 years sees the property sector outperforming
the market marginally for the period. Over-performance are
registered for the first and final sub-periods while under-performance occurred
in the middle sub-period. Regression statistics suggest that general market conditions and macroeconomic factors have telling effects on
sector performance.
Individual property stocks returned mixed results for the period from
1988-June 1993: 3 stocks (DBS Land Ltd., Malayan Credit Ltd., and
City Developments Ltd.) out-performed the market while UOL Ltd.
under-performed. This suggests that performance can be inconsistent
over the same period within the sector.
Prior to the publication of this paper, the opportunity arose for the
extension of the review period to 31 December 1993. Simple percentage
increases were computed for the market and sector indices, and the
adjusted share prices of the 4 property stocks. While the market index
has risen some 40% since 30 June 1993, the sector index has raced
ahead with a 78% increase. The individual property stocks are not to be
outdone, rising between 52-85%. As the Jensen, Treynor and
Sharpe Indices were not computed thereon to measure actual performance,
these results can only be indicative of trend.
The property sector is shown to have out-performed the market over
the last 15.5 years--a financially rewarding experience for any investor in
property stocks during the period. If the rising trend persists, as recent
results are apt to suggest, then boom will reign yet in the property sector
for time to come.ACCOUNTANC
