Flippers’ sales and market mis-pricing: evidences from the Singapore private housing market

This paper defines housing flippers as home buyers and sellers whose trading is motivated by the capital gains accumulated within a short time period. Non-flippers are rental housing investors and owner occupiers. We attempt to offer an alternative explanation to housing market mis-pricing by scrutinizing their differential trading abilities and analyzing the positive feedbacks of non-flippers triggered by flippers’ sale volume and selling premiums. We empirically prove that housing flippers have the highest trading ability in terms of buying low and selling high and are able to induce the positive feedbacks of rental housing investors and owner occupiers who represent the majority of housing market participants, which eventually lead to housing market mis-pricing. Our findings question the validity of the literature interpretation on the roles of informed flippers in smoothing housing market through additional supply during uptrend or booming periods. The findings imply that transaction taxes, such as the stamp duties targeted at flippers, should be a long run policy in order to stabilize long run housing market dynamics; and owner occupiers, who dominate a housing market, should also be properly restricted to curb an over-heated housing market while at the same time avoid malfunctioning housing market. Acknowledgment: We thank the participants of 8th ReCapNet Conference, especially for very good comments from Ms Li Ling from HKU, Prof. Shaun Bond from University of Cincinnati, Prof. Peng Liang from Penn State, et al. We thank the participants of the referee session at ERES Conference 2016, especially for very useful comments from Prof. Michael LaCour-Little from California State University, Fullerton and Dr. Anastasia Girshina from Ca’ Foscari University of Venice. We also thank for the very useful comments from Prof. Fu Yuming of National University of Singapore, and Prof Dan McMillen of University of Illinois at Urbana Champaign. Surely, all mistakes belong to the authors. ∗[email protected]