‘Unsold’ units not the same as ‘oversupply’

It should be clear by now that these two terms i.e. “unsold” and “oversupply” are completely different in meaning when used in the context of the property market.

However, many continue to be confused with what these two terms actually mean.

This is one major reason why so many are adopting a wait-and-see attitude before making the decision to buy property. They think there’s an oversupply in homes which mean property prices will eventually drop.

Many are even waiting for this to happen for unsold units in popular mature neighbourhoods.

Oversupply: The Cambridge Dictionary defines it as a greater supply of something than what is needed. How do we know if there is an oversupply of property or not?

Ask 10 of your good friends and another 10 colleagues who are below 30 years old this question: “Do they own a property?”

The answer is likely to be “no” but if you probe further, you will find that they are looking to buy in the near future.

By the way, one million civil servants do not yet own a property.

Last but not least, our Housing and Local Government Minister Zuraida Kamaruddin announced that 100,000 affordable homes will be completed in 2019.

It is very likely her goal of 100,000 units completed is not because there is an “oversupply” of homes in Malaysia.

Unsold: On a yearly basis, over 100,000 new properties are launched in Malaysia. The number of unsold units are much lower than 50%.

For some areas like Selangor and Kuala Lumpur, this percentage is something to be proud about and not something to be frowned upon.

Take a look at the image to understand the percentage of unsold properties after any particular launch.

The current number of unsold stock is because the units were either too expensive or in locations not favoured by many. In other words, it was a mismatch in terms of demand versus supply.

Before you buy a property, you must understand what you need. Then, you have to be realistic about it.

Out of 10 “must-haves” in a property you want, it’s perfectly fine to find an affordable property with six out of those 10 “must-haves”.

You must understand that when 10/10 of all the things you love are already available in a property, the price of that property would have already factored in all of these.

If the properties in these areas are not yet so expensive, newer areas will have no demand, period.

That’s why many younger people say property prices are too expensive but when it’s pointed out that some areas are 10-15 minutes away, they say that it’s too far or not the kind of property they are looking for.

Well, keep searching then.

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.