Property prices keep rising, why not just build more units to push prices down?
Just a question of demand versus supply, right?
Is property demand all about demand and supply? If prices are dropping, stop building, then prices should stabilize. if prices are rising, just build more so that people have more choices and does not have to fight over the few units. When no one is fighting for the limited supply of units, then prices should also stabilize. Well, what if everyone just want to buy in those few areas which everyone also want and totally ignore properties in locations which nobody wants? This is why property prices can both drop and rise at the same time.
Let’s look at what is happening to an advanced property market which is usually reflective of what is happening to the property market.
Article in reuters.com Australian home prices will rise a steady 4–5% each year over the next three years in an already expensive and supply-constrained market, according to a Reuters poll of property analysts.
While those gains are modest by historical standards this builds on a near-40% price surge in five years, significantly boosting household wealth and investor returns in a country where two-thirds of households own their homes.
Despite the Reserve Bank of Australia (RBA) holding rates at a 12-year high of 4.35% through 2024, prices still rose about 5% last year, supported by strong population growth, chronic undersupply and a robust labour market.
The Reuters poll of 17 analysts, conducted May 16-June 2, predicted national home prices would rise 4.0% this year followed by gains of around 5.0% in both 2026 and 2027.
Home prices in Brisbane, Adelaide and Perth, which have surged about 80% in five years, will rise 5.0% in 2025, according to the poll. In Sydney and Melbourne they are forecast to rise 3.5%. Article in reuters.com
What about the property market in Malaysia then?
Article in theedgemalaysia.com. “Malaysia’s property transaction value fell 8.9% in the first quarter of 2025 (1Q2025) to RM51.42 billion, compared to RM56.47 billion a year earlier, according to the latest data from the National Property Information Centre (Napic).
Transaction volume also dropped by 6.2% year on year, with 97,772 transactions recorded in 1Q2025 against 104,194 in 1Q2024, Napic said in a statement on Friday.” Read the full article here: Article in theedgemalaysia.com.
Average prices are definitely lower in Q1 2025 as per stats
We can see property transaction value fell 8.9 percent while the property transaction volume dropped 6.2 percent. In other words, average transacted prices are indeed falling. What we cannot ascertain for sure is whether they are for all the same properties or are the properties being transacted are just of lower prices in the first place yeah.
If we want to know for sure, then just go to the properties we know, check their current prices versus last year in order to have some idea. Just need to note that we also need to look into the locations… (more popular ones could be less affected) the type of properties (as people say, landed should be more resilient than condos)… the size of those units (the larger the unit, the chance for falling price is higher too since its absolute number is bigger)… the rental returns (with good rental returns, prices should be resilient) etc.
Do not bet on property prices keep falling though
If property prices continue falling, it could mean that the number of people needing a place to stay is reducing yeah. Could be a sign there are fewer jobs, fewer people earning a salary… Please remember that even if we say people prefer to rent, somehow they need a property too yeah. So, rent or buy, property units are needed. If rental is good, property prices are unlikely to keep moving down.
I would not want to wish that property prices keep falling while salaries keep going up, economy keep going strong, car sales keep going up, businesses continue to do well etc because this is not realistic yeah. When everything is doing well, then everything will be doing well. Hope everyone understands this fact and also the fact that when prices are falling, there will be a period when developers stop building and they will stop until they see prices moving upwards again. By then, it would be too late for buyers because supply needs a few years to come onto the market yeah. Find a good property at a good price, can buy and stay lah. Property is always a long term investment.
For the Australians, I do worry for them if all the predictions about property price increase comes true. I am not sure if their average salary will be rising at the same pace for them to keep up with the property price increase. Let’s hope those predictions do not come true and more Australians who needs a home will afford to buy a home too.
Cheers.
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