Analysis of Property Market - Demand
This section is about local market demand for properties.
Earlier post on Demand in Property Market is referred here.
Past year 2013 Q4 Valuation D09 Hotel vs Shoplot Investment Option ; and
Economic-based Analysis, Competitor Analysis and ROI for Retail Shop vs Hotel
According to Hamid, 2007, estimating property demand is far more complex than estimating the supply. There is no report from National Property Information Centre (NAPIC) on demand.
An analogy is provided here. Determining demand for property is like determining a demand for a man (or woman) in a matchmaking. For example, a single man wants to get married. He is the Supply. The Matchmaker is the agency that will look for him his bride. However, the demand for his 'Supply' can be a complex matter. It can be availability of single women in the vicinity, their expectation, their likes and dislikes, age-group and despite the willingness for the man to accommodate any woman, the demand for him is really uncertain, and varies between one woman to another.
Thus, similar to the above scenario, the demand for property is affected by myriad of factors. Major variables involved are extracted from Table 1.6 page 26 (Hamid, 2007) below:
Inferential Analysis (Global Demand Analysis) : Population, employment, income, number of households, house price, changes in the number of households, net removal or demolition of units from the housing inventory, actual vacancies, average number of units vacant, actual housing units under construction, average number of units under construction.
Market Survey-based Analysis : Size of local population, net migration, direct generation, spill-over, demand from alien buyers, employment, age structure, buying interest, income level, housing propensity to spend, property market concentration, and property price.
Model-based Estimation : Physical, locational, economy and market variables such as land size, floor size, type of property, age of building, building conditions, site position, location, neighbourhood quality, project size, and property price.
In my opinion, these variables can be divided into two major groups:
1. Economic factors that is seasonal.
2. Demographic factors that is constant for a longer period of time.
Economic factors
The general economic performance of the country would reflect the wealth of the nation. The richer the nation, the better the people in their respective economic activities. With business activities, people gain employment, with higher income, and thus increased in purchasing power which can contribute to their higher standard of living. All these would foster property market as people are able to save and buy property as for investment or own use.
Demographic factors
Population pattern can affect demand for housing. Inevitably, young nation with Gen Y baby boomers would require housing when they start their families. This is like in America after the Second World War. Young families are the work force, they drove the economic activities. Thereafter, they themselves are consumers of the food chain, housing, services and entertainment. Similarly, Malaysia is undergoing this change.
From the age-group 15-29 (2010) there is an explosion of population. This is much more than the older age-group of 30-44 (2010) - see graph below. This resembles the active working population in the next 10 years as we reach 2020. By then, the 15 becomes 25, and 29 becomes 39. With this major chunk of younger age-group maturing into middle age, their purchasing power will definitely increase as they start their families. Owing to this, there is a tremendous appetite for housing in the next 5 years (2016-2020).
Future: Population Projection 2010-2040
Department of Statistics, Malaysia on 18th Jan, 2013 had published online for download a projection of population pattern from 2010 census to 2040. Extract below:
The above Chart 2, found in page 3 of the Population Project Malaysia 2010-2040 is very crucial for the demand analysis.
As earlier on discussed, the 2010 report showed a 'baby boomer' 15-29 year age-group. This age-group will progress to older age (45-59) after 30 years (2010+30=2040).
The younger age-group that subsequently replaces them appears to be similar or only slightly increased. The phenomena of baby booming is no more apparently significant as before (probably 30 years ago). This can be due to better quality of life (both parents working) and higher socioeconomic status. As people are having smaller family unit and women become major workforce, the big family unit of the past will gradually disminish. Therefore, the triangular shape of the graph would gradually become 'kite' wau bulan shaped or mid-aged population will be more than babies or elderly. Type of housing will also move towards apartment and studio living.
Before the population starts to become an aging population, the society will be rich with most people working, or having worked for 10 or 20 years. These population will have acquired saving and wealth and are of high socioeconomic status - educated and specialized. Thus, they are able to invest in properties and take up the surplus, deploying the knowledge and versatility that their fore-parents never had.
In view of this demographic trend, Malaysia will experience an up trend on property demand for at least the next 10 to 20 years (from 2010 data). In fact, this is the best time to capture the market share as market is growing and land are still in abundance. Estate agency practice (as this Marketing Plan is for) is becoming regulated with enforcement of various laws. Thus, it will be an opportunity for all registered agencies, tapping into the vast potential of the growing property market.
This part requires further analysis in Part 4 - historical transactions. As Estate Agency Practice is a multi-million dollar business, there are challenges and competition that would affect an estate agent. The analysis of such challenges and competition is the topic of the next two sections.
Continue to Part 4 here.
Ref:
Abdul Hamid Mar Iman. 2007. Property Supply and Demand. Penerbit UTM. Page 25-41.
Population distribution and basic demographic characteristics 2010. Chart 8; page 6. Available at,
http://www.statistics.gov.my/portal/download_Population/files/census2010/Taburan_Penduduk_dan_Ciri-ciri_Asas_Demografi.pdf
Population Projection Malaysia, 2010-2040. Chart 2; page 3. Available at,
http://www.statistics.gov.my/portal/download_Population/files/population_projections/Population_Projection_2010-2040.pdf
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