There are many reasons why most graduates flock to the bigger cities after they have graduated. There are more job choices. Beyond choices, there are more opportunities to grow in their careers because there are more companies, more Multinational Corporations (MNCs) with their offices in major cities.
Small-to-medium enterprises (SMEs) which are thinking of higher business volumes will also open up in the city centres first. From car workshops to printing businesses and even just selling nasi lemak by the road side. There are by far more people walking past their stalls in the city.
This is why when you look at property demand, it is usually higher in bigger cities. Not necessarily for new homes but when the three main colleges in Subang Jaya welcomed thousands of new students in 1994, the demand for rooms suddenly grew.
Many home owners became rich fast within a few years. Imagine a corner unit being renovated into a home of six rooms with three students to a room. If each pays RM250 that means RM750 per room.
RM750 times six rooms equals RM4,500 per month. The three colleges then were Taylor’s, INTI and Metropolitan College.
Which city has the higher population in Malaysia? Here’s an image showing the population from worldpopulationreview.com. Now you understand why property prices in Kuala Lumpur lead all the other cities.
The demand is high. In fact, look closely and you will realise that within this Top 10 list, there are already six within the Greater Kuala Lumpur area.
So will property demand in smaller towns increase? The answer is “yes” but it will not be like the cities in terms of quantity and even choices.
Will there be an oversupply of units then? Actually, an oversupply can happen anywhere. Lower demand simply means less developers will be building while more demand may also mean an overbuilding of properties too.
That’s when a mismatch in property demand and supply happens and suddenly you have the current overhang situation.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.