As I started off my career in a supply chain where managing supply and demand is what I do day in day out. I see great similarity when this concept is translated into the real estate arena,and this is how I visualise it to be.
Let me first talk about the black box which is the complex events that happen whenever a new property listing enters the market till an interested party decides to buy it. The characteristic of this black box is expounded in another post of mine.
As for this post, we will focus on what is happening outside the black box – the big picture.
Arguably, the number of properties entering and leaving the black box is determined by the collective efforts of different players and two driving forces, which are illustrated by the gears, wind turbine and the Sun respectively.
The players in the supply side are as follows;
- Home owners
Creates supply when they choose to upgrade or down-size their properties by selling the current one.
- Housing Development Boards (HDB)
Creates supply by launching new flats to ensure a steady flow of affordable public housing for Singaporeans.
- Real estate developers
Creates supply when they won land tender, build and sell the residential units subsequently.
Creates rental supply when they have properties to rent out and generate passive income.
On the demand side, there are four main players ;
Generates demand when they are doing bulk purchase for collective sales.
Generates demand when they stagger units in new launch into different batches.
Generates demand when they want to rent a property.
Generates demand when they want to buy another property.
Generates demand when they want to buy another investment property.
Other than the players in the real estate arena, there are two important driving forces which affect all the above-mentioned players.
- Government policies
Whether is it cooling or warming measures, it has the aim of bringing property market to a certain future state that is aligned with the government’s growth plan in a sustainable manner.
Arguably, the supply and demand of Singapore real estate market are probably the most well calibrated one in the region, possibly in the world as well.
- Broker’s strategies
Having the interest of his/her client in mind, agents have to seek the best deal either by selling high or buying low by designing personalised strategies to facilitate transactions in the most optimal manner.
These collective efforts of agents become a strong driving force that drives supply and demand, particularly in times of a property price reversal whereby a strong volume is vital to ensure a sustainable reversal.
If government policies are the gears of a manual car, broker’s strategies will be the acceleration and brake pedals that facilitate getting to the right speed based on the gear selected by the government.
Hence, you being a small player in the property market, have to understand the government plans well and work closely with your property agent to design personalised strategies for optimal growth of your real estate portfolio growth for the next 10 years.
What is your strategy?