Demand and Supply of Singapore's private home

Singapore’s private home prices reach a new high in the third quarter in this year. A government report came out after developers sold more homes. In line with preliminary estimates released by the Urban Redevelopment Authority 1st Oct 2012, private residential property price index rose 0.5% in the three months ended 30 September. The index exceeds 0.4%in the previous quarter. Singapore decided to inhibit the increasing trend of shoebox apartments that are smaller in size by capping the number of homes that can be developed in suburban projects. They estimate the home price index will rise by 1% to 3% this year.

In economics situation, the private home price in Singapore keep on going high is due to the demand of private home. Wants are the unlimited desires. When the citizens of Singapore demand the private home, they can actually afford it and plan to buy it. The quantity demanded of private home increases so that developers and producers increase the prices because at the moment the demand of private home will not decrease. The government plans to limit the number of homes for apartment projects outside the city’s central area to discourage shoebox units. The new rules will be implemented from Nov 4. When the price of a good or service in market keep increasing, government have to take action to stop it because it might affects the economic situation of whole country. Government will take several actions to reduce the price of a good or service to the equilibrium point. The purposes of these actions are to concern for middle or lower income workers. Government has to make sure all those lower income workers can afford a shoebox apartment someday. More than that, if the government didn’t take any action, other country will start to complaint and criticize the system of the country. It’s is because the price of a good in the country is too much higher or lower than another country.

According to the report, purchases made by Singaporeans increased to 35% of the total this year from 19%in 2011, almost on par with foreigners, DTZ Holdings Plc said, citing authority data. The law of supply states other things remaining the same, the higher the price of a good or service, the greater is the quantity supplied. The number of home purchases made by Singaporeans this year has totally beyond for the whole of 2011. Population is one of the factors that bring changes in demand. The larger the population, the greater is the demand for goods and services. When the population of Singapore increases, it may also bring changes to the demand of private home. Due to this implication, the purchases made by citizens of Singapore might increase. Buyers, both foreigners and locals are slowly increasing. DTZ Holdings Plc expect to see more activity and interest in luxury housing in the next half year with a few projects gearing up for launch.

On the other hand, prices of non-landed private residential areas increased 0.2% in the prime district in the quarter, getting higher 0.6% than the previous quarter. In addition, prices increased 0.5% from the previous quarter in suburban areas. As we can see, the index between two quarter of non-landed private residential areas has not much different because the government is maintaining the prices to let it retain at the market equilibrium point. Besides, this phenomenon is also because of the income of the buyers. Income is another factor that brings difference in demand. When income increases, most consumers will buy more goods or services. Conversely, when income decreases, consumers buy less. When there is less consumers in the market, the producers will not increase the supply of goods or service because a surplus will rise. After the surplus rises, some producers unable to sell units they planned to sell. In this situation, they forced to lower the price toward the equilibrium price. At last, the price will back to the equilibrium point. If those producers don’t lower their price, consumers will search for another cheaper product which is called a substitute. Moreover, it is also because of prices of related goods. When the price of a good or service that consumers plan to buy is higher proportion than their income, they might search for substitutes. A substitute is a good that can be used to replace for another good. When the private home prices increase, buyers will search for other units which are cheaper. When the price of a private home unit in Singapore is higher, they might search for cheaper unit like non-landed unit or smaller unit.

In this situation, private home are normal good. It is because a normal good is a good or service that consumer will buy when their income increase. When consumers get higher pay, usually they will search for better goods or services. Although the purchases made by Singaporeans increased to 35%of the total of this year, private home sales in August fell 27% from a month ago. Under the Chinese Lunar calendar, developers sold less properties in that month considered inauspicious. This situation illustrates preferences is also a element that alter the demand. Preferences define the value that people place on each good and service. Preferences depend on such things as the weather, information, and fashion. As the report showed, some of the buyers think that buying a home within ghost festival is very unlucky.

In conclusion, a competitive market involved many buyers and sellers. It means that individual buyer and seller can’t influence the market price. Demand and supply within the market sustain to balance the prices of goods and services. With these 2 methods, there will be a equilibrium point on the demand and supply curve. Threfore, a equilibrium price rises in every single market. Desires are unlimited. Because of this, lot of things can be produced. However, unprofitable things will not be produced by suppliers. Lastly, demand shows a determination which wants to meet the satisfaction. On the other side of the coin, Supply states a decision which is technically feasible projects, thereby generating it.