How come property prices suddenly rise? Can still buy?

How come property prices suddenly rise? Can still buy? This is one question which people ask me all the time. My answer? As long as you can earn a lot more than the typical people, property is not really necessary. However, if you salary is typical, then I treat property as a hedge against inflation and also poverty lah. Imagine paying rental for 100 years or more? Generations after generations will remain poor and the only one getting richer is the home owner. Browse through the sad stories of the homeless and you should understand why I always encourage home ownership.

Here’s one such recent article on homelessness: 122,000 homelessness is one real reason why we need to have a property

Now for the real case happening right now.

Article in thestar.com.my. South Korea’s home prices rose at a faster pace in July, as prices in the capital Seoul jumped by the most in more than four years, data showed on Friday (Aug 16), amid growing concerns about financial stability risk stemming from a bullish housing market.

The house transaction price index rose 0.15 per cent in July, faster than a monthly rise of 0.04 per cent in June and the fastest since October 2023, according to the Korea Real Estate Board.

Prices in Seoul jumped 0.76 per cent over the month, the sharpest rise since December 2019, as demand for investment grew in areas undergoing or planned for reconstruction and resulted in more transactions at record-high prices.

Earlier this month, the government unveiled measures to boost supply in the real estate market, targeting the building of more than 400,000 new homes in the next six years to curb steep rises in prices. Please refer to the full article here: Article in thestar.com.my.

Home transactions can happen very quickly but new properties cannot happen overnight

Imagine the market starts getting warmer and people started to buy properties again. The transaction numbers can increase quite quickly and with every transactions the prices may move up. The only issue is when many people suddenly think of buying a property, the property developers cannot build a new property overnight. Thus, prices will keep rising until supply can catch up probably 36 months later depending on the kind of property. This is why with demand, prices can suddenly change.

In a slow market however, prices may decrease until a point when buyers move in and this will stop the price decrease. For example, a property in a mature neighborhood, as soon as the selling price is 10 percent below market, what do you think will happen? Transactions can happen but after that are there other units? None… This is why slow market does not push down prices but a hot market will push up prices. Note that a financial crisis will definitely push prices down but after the financial crisis has ended?

Happy understanding.

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