Demand vs Supply is never perfect yeah. (It’s about demand and money)

I wrote this article many years ago. It’s about grabbing the opportunity when it presents itself. Here’s that article: Perfect Property with the Lowest Price.   It is still true today and the foreseeable future too. Demand and Supply is always a very powerful equation. Marketing students study them and uses it to determine the highest price that people would be willing to pay for the product. Economics students study how to use it when determining macro and micro economic policies. This is why it is possible to change the dynamics of the demand vs supply! Thus, hoping for the market to correct itself is really not possible. Especially these days when we even have artificial intelligence systems to help us. Remember the cooling measures instituted by our Bank Negara Malaysia (BNM) beginning 2013 /2014? It helped to stabilise the home prices generally but the prices in many hotspots continue to rise.

Ever wondered why a hotspot is so expensive? Briefly, it meant that there are far more buyers that want that area than there are the supply of homes within the same area. It’s not just because it’s near the MRT (there are lots of areas near MRT which is not expensive yet), it’s not because of international school (there are far more areas nearby international schools which are still cheap) and it’s definitely not because it’s near to a major shopping centre. Well, it’s a combination of these factors but mostly, it is because people who could afford them continue to agree to pay ever higher prices for them! There is nothing which the government could do when it comes to this kind of demand vs supply. Not even if the government were to build another 10 million new affordable homes in Malaysia yeah. However, what the new supply could do is to enable more people to own homes without the need to overstretch themselves for the expensive homes. This is a good intention.

You see, if you are the owner of a unit within a hotspot and are staying there and you bought your place at RM1 million and there’s now another 1 thousand more RM300,000 homes being built a few km away from your home, will you be pressured at all to sell your RM1 million unit at RM900,000 or lower? The answer is usually a no. The reason is because in a mature neighbourhood, the available supply up for sale is usually very low versus the potential demand from people who admires the place and wants to move in. In short, it’s about demand and money, not so much about just more supply. Of course, one can also say that what happens when the demand changes? Perhaps there’s a new hotspot right next to the current hotspot offering even more attractive features? Haha. That’s another story. By the way, there’s really no guarantee that a hotspot today will continue to be a hotspot in the future. It’s far more important to understand the reasons to buy instead of looking at just the price to determine if it’s an awesome area yeah. Happy investing.

written on 3 Aug 2018

Next suggested article: Closures ALWAYS point to ‘tough outlook’


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