Oversupply of Residential Property

 

 

oversupply

 

Oversupply of residential property due to speculation may slow down market
[ Source from The Star dated September 10, 2015 ]

 

PETALING JAYA: The secondary residential property market could face a slowdown in transactions within the next six to 12 months due to oversupply of properties caused by speculative buyers.

Malaysian Institute of Estate Agents (MIEA) deputy president Siva Shanker said “secondary properties in secondary locations,” namely apartments within the RM150,000 to RM300,000 price range, could be difficult to sell as an oversupply situation has resulted.

“A lot of these properties were sold in the last two to three years and developers made a roaring business out of it. However, they’re now struggling a bit,” he told StarBiz in an interview.

“A lot of people in the past would have bought these properties for speculation,” said Siva.

He said many people bought these properties with the sole intention of selling them immediately once the development was completed.

“The buying public in Malaysia are like sheep. A few people buy, and then everyone will rush in to do the same!

“However, when everyone tries to flip it (sell for a higher price) at the same time, that’s when you create an oversupply situation.”

Siva cites an example of a 300-unit apartment block, where half, for instance, are placed on the market simultaneously by the initial (speculative) buyers.

One seller will lower the price because he can’t hold it, and then the prices start coming down.”

Siva pointed out that because transactions start slowing down, there is a misconception that property prices will crash.

“It’s not what people think – that property prices are crashing. A person buys an apartment for RM300,000 and after two years, wants to sell for RM400,000 and puts it on the market. But then, others also start doing the same and the buyer gets spoilt for choice.”

He said because everyone puts the property on the market, the RM400,000 price-tag would not be achievable.

“Perhaps at the end of the day, instead of RM400,000, you sell it for RM350,000 and in the eyes of the buying public, prices have fallen!

“But in actuality, prices didn’t fall. You bought at RM300,000 and sold it at RM350,000. You tried to flip the property, but you didn’t get the level of profit you thought you could get. But you walked away with a profit nevertheless.”

 

Lessons learnt:

  1. Don’t always follow the crowd (blindly).
  2. Be flexible with asking price. If you still earn a profit (although lesser than desired amount), flip it according to your plan.

 

 

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