Marketing Plan for a Realtor Part 2 - Supply

Go back to Part 1, Part 0.

Analysis of Property Market - Supply

In Malaysia, the only dependable source of information on property supply is NAPIC which publishes information on a quarterly basis (Hamid, 2007).

Various terminology of supply is explained below:

Planned Supply - Units with approved building plans but have not started construction + Newly planned units.

Incoming Supply - Units from previous quarter reports + Units under construction in review + Units completed without CF/TCF.

Existing Inventory - Stocks of properties currently vacant to be occupied. It is accumulated number of units from the previous quarters plus units in the review quarter. These are units that have been issued with CF/TCF prior to the review period plus units completed and issued with CF/TCF within the review period.

Existing Inventory

^

|

Completion

^

|

Incoming Supply

^

|

Under Construction

^

|

Start

^

|

Planned Supply

^

|

New Planned Supply

Figure 1.9 Stages of property supply (Extracted from Page 22, Hamid, 2007)

From JPPH website, under the Residential Property Stock Table, information on residential property stock is available for comparison.

From the Table 1.1 of Q2 & Q3 Residential Property Stock Table, a section is extracted here.

The annual supply of various properties are in the range of 4.8 mio units. Let us assume:

1. The market for a Realtor is dependent on the Property Stock;
2. The supply is in equilibrium with the demand - hence price is at a non-fluctuating level; 
3. The loan availability is not curtailed;
4. The general property trend is non speculative;
5. There is no restriction to sell (no RPGT consideration).

In order to reflect the enormous gap between supply and SPM school children maturing every year, some extravagant assumption is made. For instance, existing Stock of 4.8 mio units is matched to a 0.25 mio of yearly demand for housing from the earlier figure in Part 1. This can last 19.2 years before the supply runs out!

Conversely, you may say property is over supply due to inability of people to own properties. In other words, it is not that there is no supply, but people cannot afford to buy properties.

This situation gets worse over the years, and old stocks piled up while new stocks which are even more unaffordable, are being built. Soon, stock pile became an issue, but due to inflation and inability to obtain loan, property becomes over supplied.

Hence, the market report showed a few important phenomena, they are:

• Realtor has a challenge to match those affordable to the existing property stock. 
• The key is not about supply, it is about how to convince the buyer to take up the surplus in the property market.
• There is enough options to be held as investment - owning more, pick and choose.
• That demand pressure will increase as GenY increases - demography of age-group 15-19 is growing, and thus bigger purchasing power as this age-group reaches 25-30.

In summary, the analysis of supply and demand of the current Malaysian Property Market shows over supply of residential properties. As market will be slower over the next few years due to existing inventory, demand side is the factor to determine the success of the realtor. Realty should therefore focused on creating more demand from untapped segment of the population in order to match the property to the affordable population segment.

It is no doubt said by Hamid (2007) that "The Main Goal of property market is to create demand supported by purchasing power but the knowledge about supply is equally important to understand the basic market forces and processes" on summary in page 27.

Continue to Part 3 here.

Ref:
Abdul Hamid Mar Iman, 2007. Property Supply and Demand. Pernerbit UTM. Page 16-28.
NAPIC Residential Property Stock Table Q3 2014, Table 1.1, available at
http://napic.jpph.gov.my/portal/web/guest/publication?p_p_id=ViewPublishings_WAR_ViewPublishingsportlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&_ViewPublishings_WAR_ViewPublishingsportlet_action=renderFileListingScreen&reportId=1609&publishingId=433&pageno=1&from=listing
file:///F:/Research%20Market%20Size/1419310835220JadualStokHartaKediamanQ32014.pdf