Initial Property Offering: Underpricing and Learning Behavior in the Presale Housing Market

Abstract

Using a transaction-level dataset of presale private properties in Singapore over 24 years, this paper investigates the property price dynamics following project launches. I show that for a newly launched residential project, presale prices increase by approximately 0.9% to 1.5% every 100 days following the launch date, indicating a pattern of IPO underpricing. The price appreciation trend becomes more pronounced as financing costs increase. By matching transaction data with developer information, I demonstrate that developers tend to underprice their first two presale projects and then adjust pricing strategies in subsequent projects. Developers can learn pricing strategies from their experience and adjacent peers to avoid losses.