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Unraveling the Inflated House Price in the New Housing Supply

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  • Rahah Ismail

Abstract

There are a lot of concern both by public at large and the government on the inflated house price in the housing market, fearing that it could lead to property bubble and raises the issue of affordability. On a closer look at the property transactions data, it was observed that the main increase in the house price is often related to the primary housing market, i.e. new supply in the housing market whereas the sales price of existing supply, or the secondary market, remains stable or increase marginally. What is more baffling is that the two markets are sometimes in the same location, with same accessibility, with units available for sale but the sales price of houses in these market shows a marked difference. It is grounded in theory that price is a function of demand and supply. However, if supply is in abundance in the secondary market, what causes the price differentiation between these two markets. This research attempts to unravel the inflated house price in the primary market. First, the research investigates on market efficiency i.e. the extent of dissemination of sales information of both housing in the primary and secondary market. Second, it explores the level of complexity/ease in purchasing houses in the primary and secondary market. Third, it examines the costs of purchasing houses in the two markets to the purchasers. Fourth, it looks at what the housing in the primary and secondary market has to offer in terms of facilities, amenities, design and technology.This research involves looking at published data in the Annual Property Market report, interview with the Malaysian Association of Estate Agents, Residential Housing Developers Association, Auctioneers as well as survey using questionnaires to purchasers of new housing.At the end of this research, it will give an understanding why purchasers are willing to pay more for houses in the primary market, whilst similar housing in the same locality is available in the secondary housing market. The research will suggest what can be done to reduce the price gap between the primary and secondary market.

Suggested Citation

  • Rahah Ismail, 2013. "Unraveling the Inflated House Price in the New Housing Supply," ERES eres2013_44, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2013_44
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    References listed on IDEAS

    as
    1. Linneman, Peter, 1986. "An empirical test of the efficiency of the housing market," Journal of Urban Economics, Elsevier, vol. 20(2), pages 140-154, September.
    2. Itzhak Ben‐David, 2019. "High Leverage and Willingness to Pay: Evidence from the Residential Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 47(3), pages 643-684, September.
    3. Itzhak Ben-David, 2011. "Financial Constraints and Inflated Home Prices during the Real Estate Boom," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 55-87, July.
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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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