Supply and Demand
Analysis
for Residential Properties
Objectives of Chapter:
 Discuss the methods that can be used to
estimate housing demand.
* Estimating demand in general
* Local survey-based methods
Expected learning results:
 Main factors in estimating demand for residential
properties in general;
 Apply some methods of estimating demand for
residential properties.
Analysing Supply
Table 10.2: Over Supply Situation in Johor Bahru, Based on Selected Property Projects
% of over supply
Project
Bukit Indah
a) Single-storey terrace
b) Double-storey terrace
60%
40%
Mutiara Rini
a)
Double-storey terrace
b) Double-storey semi-detached
40%
60%
Bandar Baru Uda
a)
Single-storey terrace
b) Apartments
30%
10%
Indahpura
a)
Single-storey terrace
b) Double-storey terrace
30%
40%
Average
39%
Source: Sample survey, 2001.
Methods of Estimating
Residential Demand
Global Demand Analysis
Global Residential Demand
 Total population = 100,000
Eligible age (25 – 49) = 35%
Eligible population = 0.35 x 100,000 = 35,000
 Employment = 97%
Eligible working population = 0.97 x 35,000 = 33,950
 Home ownership = 65%
First-time buyer potential demand = 0.35 x 33,950 = 11,883
 Buying interest:
Non first-time buyers = 8%
First-time buyers = 30%
 Overall potential demand:
Non first-time buyers = 0.08 x 0.65 x 33,950 = 1,765
First-time buyers = 0.3 x 11,883 = 3,565
Total = 1,765 + 3,565 = 5,330
 Income categories:
Low-income = 35%
Middle-income = 45%
Upper income = 20%
 Demand by income-based market segments:
Low-income segment = 0.35 x 5,330 = 1,866
Middle-income segment = 0.45 x 5,330 = 2,399
Upper-income segment = 0.20 x 5,330 = 1,066
Class Exercise
A town has a working population of 23,000 people. From this
figure, 17% are the first-time eligible buyers while 80% of them
are non first-time eligible buyers. From these two categories of
buyers, 35% are targeted buyers. Entrance to the labour market
is estimated to be 2.5% of the working population and 1% are
potential buyers. However, only 1% of them are targeted
buyers. About 3% of the population working in the town are inmigrants; 1% out of this figure are first-time buyers while 0.5%
are non first-time buyers. From the Property Market Report,
(PMR) it was found that alien buyers constitutes 0.2% of the
total targeted domestic buyers. The information from the PMR
also revealed that the market concentration of residential
transaction is 64% from the total real estate transaction.
Estimate the demand for properties in the area. If current
available stock is 12,000 units, assess the market situation.
Answer
 Let say available supply = 12,000 units
 First-time potential buyers = 5,330 people
 Assume: one FTPB buys one unit
 DD-SS balance = 5,300/12,000 = 0.44
 DD gap = 12,000-5,330 = 6,670 units
 Excess supply = 100-44.4% = 55.6%
 SS excess capacity = 6,670/5,330=125%
 Severe excess supply, weak demand
Local Demand Analysis
Local Demand Analysis (cont.)
Local Demand Analysis (cont.)
Local Demand Analysis (cont.)
Local Demand Analysis (cont.)
Model-Based Demand Prediction
Model-Based Demand Analysis (cont.)
Variables used
Definition
Measurement
DEMAND (dependent)
Take-up rate
% sales performance
UNITSUP
Unit built
No. of units
PRODUC
Type of product
1=1-ST; 0=otherwise
LANREA
Average land area
Sq.m
FLOREA
Average floor area
Sq.m
MIDPRICE
Mid-point price
RM/unit
LOCQUAL
Quality of project
location
1=if strategic;
0=otherwise
Variable
Model-Based Demand Analysis (cont.)
qU = X + u
where qU is (n x 1) column vector of sales
performance; X is (n x m) vector of product,
locational, and neighbourhood attributes, plus
some other pertinent factors influencing sales
performance;  is (n x 1) column vector of
parameter estimates, u is (n x 1) column vector of
error term.
Model-Based Demand Analysis (cont.)
QD = qUˆ x QS
or
QD’ = adj. qUˆ x QS
where QD is predicted demand; qUˆ is
estimated take-up rate from the statistical
model; and QS is number of units of a given
product proposed to be built.
Model-Based Demand Analysis (cont.)
Qu = 71.615 + 0.002720*UNITSUP – 0.009567*LAREA – 0.001487*FLOREA
– 4.506*PROD1 – 13.655*PROD2 – 11.891*PROD3
– 0.000006023*MIDPRICE + 37.438*LOCQUAL
Model-Based Demand Analysis (cont.)
Thank you!