Supply concerns will lead to price correction?

I read a study which was done sometime back (let’s not mention the actual report here). It says that with the oversupply situation, it will lead to price correction. On a big picture basis, perhaps that is true. However, if you stay in some VERY SOUGHT AFTER neighbourhood today, did your neighbour just sold off his unit at 15 percent off? Well, it is unlikely but assuming your neighbour really did sell his unit at 15 percent off market rate, that’s one unit out of the hundreds or thousands of units within the same neighbourhood. The question is, how many units would now be selling at 15 percent below the market value? Hope every one gets the answer by now. Law of averages do not usually apply to those “above the average.” Seriously. Else, there would be none which is above the average. 😛  Well, one report seems to point out that there are some truths in the falling property prices. A major media nonetheless.

Image Source: EdgeProp.my

Have you read the NEW TheEdgeProperty digital / print paper? It is now known just as EdgeProp. Cool name I think. After my subscription ended two years ago, I did not renew. So I only read it occasionally and this morning I happened to read it. There is one article which looks interesting. “Prices fell in these five Selangor housing estates.” Just click on the link and go to Page 6. Of course you can also read the whole newspaper too. From the image, we can see these five housing estates in Selangor which seems to have lost some of its value. The most prominent one is of course the two storey semi-detached homes in SS3, PJ which showed a 10.7 percent drop in 2016 versus 2015. Note that this is ásking price.’Well, reading through closely however, it seems that the price has recovered because as at July 2017, the asking price has gone back to the same price as in 2015. Seksyen 22’s two storey detached houses are however showing a continuous drop as per the chart. From RM3.01 million in 2015, it dropped to RM2.725 million in 2016 and as at July 2017, it has now dropped to RM2.35 million. In total, the drop is 22% when we compare 2015 to current. Want to read more? Here’s that full article. 

Before we make any conclusion, I took a look at brickz.my and found out that based on their available transaction stats, the price range for a semi-dee over 5,000 sq ft was transacted in 2015 at RM2.8 million. As for those above 3,000 sq ft, the price ranges from RM1.4 million to RM1.88 million. Perhaps the size which was covered by EdgeProp’s report is somewhere in between 3,000 sq ft to 5,000 sq ft which is why its numbers are in between. From these two differences, we could already see that we may not be able to just rely on average numbers in order to make a decision about the value of the property we want to buy. It’s always good to understand a bit more from different sources. Please be reminded that if a good property is cheaper this year than last year, it is probably a good buy already. Unless something unforeseen happens further, good neighbourhoods do not usually have a lot of homes for sale. (Percentage wise lah). Happy scouting.

written on 29 Sept 2017

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