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Demand vs Supply, Location and Price, Your Decision.

Posted in Personal Finance

Few weeks back, I read in news that the price of HDB flats were softening. On 15 July, in PropertyGuru.com.sg, it has been reported that the Ministry of National Development (MND) of Singapore will be reducing the supply of HDB flats this year. From 24,300 originally planned, it will be reduced to just 22,400 units. For the larger units, which are typically for families, it will be only be 16,700 units, down from the planned 18,600 units. This is still sufficient as the estimation is that there are 15,000 new Singapore family formations every year. Even the backlog applications are being cleared up. In other words, if you apply and there’s a unit, there’s really no competition. First timer application is now only between 1.0 and 1.7.

Do you know the significance of this pieces of news about Singapore’s HDB flats? The significance is in the numbers. They know every number they want to know and they can plan every detail. It is so easy to understand why certain policies are put in place. If you are living in Singapore and trying to qualify for a HDB flat, this is a very good year for you. Just make sure you do not delay this decision but it is not always that the ratio is so favourable to you.

Then again, if demand and supply can be somehow controlled, then why has property prices been increasing in Singapore? Why has it increased to much compared to the world? It has even contributed to Singapore being ranked the most expensive city in the world! Truth is, property prices are never about policies even if it can affect it. Property prices is always about the demand versus supply. There are many more new units, true. However, there are not many additional units in AREAS that you WANT. So, you decided it must be that particular area, and when many decided the same, demand increases but supply is the same. Prices naturally go up and the highest bidder gets it.

Hope everyone understand that due to ‘location scarcity’, you either pay higher or you can choose to buy further, newer areas. Sure, it will be 10km away or additional 15 minutes. Sure, there are no huge malls there, YET. Sure, the community there are not the affluent type that you aspire to be. The prices are however, much lower. How about buying that unit, save up to buy another unit and the journey continues? Think about it. Please do not speculate, chances are you will be burnt because if governments with full statistics are unable to plan the actual prices, there’s no way you can.

written on 14 July 2014

Next suggested article:  It’s the duration, not the distance. ok?

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8 Comments

  1. racistmalaysian
    racistmalaysian

    True, its demand and supply. To be more specific, demand of flipper+real home buyer >>> supply. Its not real demand. When supply meet flipper+real home buyer demand, you will see the price fall off the cliff. Hahahaha….

    July 21, 2014
    |Reply
    • Actually in Malaysia, latest figures showed that 84% of all mortgages are those with just one property. Nevertheless, there are definitely people who have more than 3 properties and these people can be what you said to be flippers. As for pricing falling off the cliff, it depends on whether the price is way too high. It will not because supply is more than demand because statistically, based on demographics, demand will continue to exceed supply but the type of properties versus the buyers may have mismatch; too high priced!

      July 21, 2014
      |Reply
      • racistmalaysian
        racistmalaysian

        I think you are correct. There’s a mismatch between property price and buyer. I remember 3 years ago, a RM400k condo is very expensive. But now its considered affordable and only those with low income can buy. The mismatch is so bad that developer can’t move their condo, and subsales has stagnanted. We just need to wait for more high price condo with DIBS to flood the market and we’ll have a perfect storm next year.

        July 22, 2014
  2. Ang
    Ang

    Hi

    To those who dream of 1m in price for their condo in tanjong bunga, it might be too ridiculous and only can be furfilled in the dream, this type of condo for 1m is considered far far beyond affordability…. it seems that seller is getting greedy.

    July 22, 2014
    |Reply
  3. Hips
    Hips

    Charles, I like the way you present facts in your article. Please continue to write and present your facts and opinions here.

    August 31, 2014
    |Reply
    • Thank you for the encouragement. Take care. We learn together.

      August 31, 2014
      |Reply

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