3 Ways to Determine the Supply & Demand of the Location

Supply and demand are fundamental to the property market. The location with low supply and high demand is what we should look for, right?

But, how do you measure the supply and demand of a particular location?

Now, I’m going to reveal the “3 ways to determine the supply and demand of the location”.

1. Rental Return & Vacancy Rate

From my experience, one of the main reasons why homeowners wish to keep and have no intention to sell their property is because of the high rental yield.

Because they are comfortable to collect high rental income and not easy to find another property with high return.

I like to use Clement Canopy as an example. Again, I mentioned before the rental for the 2-bedroom in Clement Canopy can fetch up to $3,600 which is quite high.

This project consists of 505 units. By referring to the property portal at this moment, there are 14 listings for sale and 13 listings for rent. 13 units out of 505, we get 2.6%. That could mean that the vacancy rate in Clement Canopy is only 2.6%.  It performs much better than the overall private property market in Q1 2020 which is 5.4% vacancy rate. This translates that the landlords of Clement Canopy can find the next tenants within a very short period.

So, why does Clement Canopy rental return is so good with low vacancy rate? Most likely it is due to the undersupply and high demand in the region itself.

2. Propertyguru Insights

We all know that PropertyGuru has the most listings for resale properties.

They can base on the number of listing on the market to determine the number of supply.

PropertyGuru has the highest number of visitors. So, when you go and search particular property, they capture the data and based on that they can read the market demand.

Therefore, PropertyGuru has this feature known as “Market Supply Gap” for every single district.

Let me show you an example. District 15 for Marine Parade and East Coast area. The data shows that the 3 Bedroom unit has high demand and low supply. Therefore, it shows this is a good opportunity for 3-Bedroom sellers.

Take a look at District 19, Punggol, Sengkang and Hougang. The 4-Bedroom the demand is high while the supply is low. So, it’s a good opportunity for the 4-Bedroom sellers.

3. Population (Demand) vs Total Number of Units (Supply)

I would deem the total number of residents of the town as the demand. While the total number of condominium and apartment is equivalent to the supply.

I got these data from the Department of Statistics Singapore.

I take Tampines estate as an example. There are more than 250,000 residents and 26,900 units of condo in Tampines, and the rest stay in HDB flat.

I divided the number of residents by the number of units. I get 9.5. Let’s round up to 10.

In other words, in every 10 persons in Tampines, there is only 1 stay in a private condo. The higher the number, the better the demand oversupply.

Let’s look at another example, this time I am looking into a subzone.

Ok, Potong Pasir. The total number of residents is 11,700. And the total units of condo is 1,790.

After dividing the numbers, I get 6.5. So, I round up to 7.

Meaning that in every 7 persons in Potong Pasir, there is 1 stay in a private condo.

I have done the summary for every single estate. As a result, I feel that Outram seems to be the highest demand oversupply in Singapore.

By using this concept, you can identify the supply and demand of each location.

I have the subzone numbers which is more detail. If you wish to download, click the link here.

Conclusion:

To understand and determine between supply and demand of a region, you may refer to these 3 ways:

• Rental return and vacancy rate.  A place with high rental income and the low vacancy rate is likely to be the place that is undersupplied and high demand.

• PropertyGuru insights. Because most homebuyers are searching through this property portal. Therefore, most agents including me will still publish all the listings there. And that’s why PropertyGuru can detect both the supply and demand and eventually produce the “market supply gap”, which can be used as the reference for supply and demand of the district.

• The data for the total number of population and total units of condo in every single subzone of Singapore. I deem the population as demand and the total units of condo as supply. If the demand oversupply is very high, it could an indicator to tell the undersupply of that location.  However, this method only works well for HDB estate. We cannot use apply this method for the central region because mostly are private properties.

I hope my article is helpful to you. Appreciate your support and contact me directly if you have any question.