20181103 (Sat)
When a property dealing can be transacted within 3 days, what would happen in a crash?
During a visit to a property booth, I was given the impression that when a transaction is shortened to 3 days, the price shock during a downturn (or speculative sale) will be magnified. Logically, when transaction becomes so instance, market react to price fluctuation in a bigger “shock” than when it is less immediate. Compare stock market now and stock market 50 years ago. Any bad news in the market today will send in some knee jerk correction in an instance. Therefore, stock exchange has to halt trading to withstand such stress. Imagine the news of JackMa stepping down overnight! He softened it by pushing through a year of transition.
Thus, if transaction of property (from booking to transfer of name) could be completed in 3 days (I was told HongKong can do it!), the property prices can react to news like the stock market.
Is that good or bad?
Of course, it become more efficient – or transparent. Stock market is an efficient market. Property market is a very inefficient market. Efficient market adjust to price fluctuation in an instance, whereas inefficient market does not react to price fluctuation or less affected by price change. For example, you just bought a unit from a Developer. Tomorrow, you heard that someone else has suffered a loss selling it to third party. What would you do? You probably would sell to safeguard your position!
This will not be good for the developer, right? At the end, the developer cannot sell any unit due to market sentiment. Conversely, the market can be maneuvered to the advantage of the developer. For example, a unit was sold today at X price, tomorrow it went to 2X! The buying frenzy will send the price skyrocketing! So, government will not likely allow that to happen. Which means, certain intervention will be in place to sustain a healthy transparent dealing in properties. It will be gradual and no knee jerk reaction should send the property market crashing down! The implication will be too big a stake to the market administrator and policy makers. To the banks, that will be nightmare!