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Easiest way to bring down home prices – build too many

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There has been non-stop articles about this. The reason for house prices being so high is because there are insufficient number of houses being built on a yearly basis compared to the rate of urbanisation, etc, etc, etc. This may be true for some people but I seriously do not think so. The reason is simple. Let’s look at the effective and efficient government of Singapore. Are they not controlling the whole property market with their HDB planning? There were too many for 2014, thus they are reducing the 2015 supply. According to the best scenario, build more units. If prices go up, flood the market with huge numbers of units, make the prices fall and everyone gets a place to stay! It’s harder to be done than said though. Singapore’s property market has not stopped its increase in price for past many years with the exception of 2014. So, was 2014 prices decrease due to huge supply of HDB flats? Well, truth is, no. It was due to many other reasons including the main suggested one, cooling measures by the government since 2009. The reason for cooling measure is NOT to bring prices down. The reason for cooling measure is to STOP prices from going up way too fast compared to the actual fundamental, in this case demand.

Thus, I do not believe that building more homes would necessary bring the prices down. Unless the new homes being built are really what the buyers want. These are some of what the buyers want. Must be a aesthetically pleasing, right sized and nearby to public transport for the weekdays, close to many expressways for the weekends plus prices as low as possible and last but not least location, location, location. Mall must be nearby, schools must be nearby and if possible a university too. Sorry, there are many more reasons. Price? Buyers want cheaper than RM500,000 if possible. Suddenly, there are not that many which can fulfil every requirements.

I have been to many property fairs, I have yet to see such units being made available by any private developers. As for the government ones, both the federal and the state ones, it does seem that the new concepts being bandied about is indeed much better than the low cost of yesterday. The only issue? It’s a few years away from completion of the first batch. The first batch is definitely not the tens of thousands of units being promised. The first batch may be a few thousand units in total spread throughout the whole Malaysia and this meant that the market would still face price pressure, right? Since the supply remain to be low.

After explaining in such detail, do you still think building more would bring prices down? Or do you think it is best that everyone, including you and me be a bit more objective and STOP looking at ONLY certain properties and instead be more OPEN to opportunities? For those who really earn a lot, can you stop thinking that since you can still afford, you should buy ever higher? For those who do not earn that much, must you force yourself to buy that condo which will endanger you and you loved ones with the prospect of bankruptcy? For the middle income ones which everyone claim they are these days, can you accept driving an extra 15 minutes? Buying a secondary property perhaps? This increases your choices and reduces the pressure for everyone who continue BIDDING up the property prices at the areas everyone like? These are the areas where supply is lower than demand, thus prices will continue going up. Problem is, many said, ‘I don’t want’ or ‘I prefer new ones’. I rest my case.

written on 9 Nov 2014

Next suggested article: Why not leasehold property? (updated)

 

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