In this article, it state about the imbalance market of property where the level of demand and supply is not equal. As we know, in Malaysia, there are many developers struggling in the build up of the residental area. This is due to the rising demand of Malaysia citizens towards owning their own houses.
Unfortunately, the house developers don't get the profit as they expected. Why? If we compare the average income of Malaysian and the price of house per unit excluding the interest, majority of Malaysian can't afford to purchase the house that they dreamed of. Moreover, the declining achievement of Malaysian economy and the rises of goods sold could increase their burden and liability.
As result, economic surplus occur. In this case, it will be producer surplus where goods are sold at a higher price than the lowest price the producer willing to sell for. This will lead to surplus in supply which indicates the price of the houses in this situation, might be too high.
However, the developers could get the profit if they work on a research and development and invent a new modern technology. This R&D could be the reason of the future economies of scale of property development where the cost advantage arises with increased of output of a product. The greater the quantity of goods produced, the lower the per unit fixed cost because these costs are spread out over a larger number of goods. The economies of scale may reduce variable costs per unit due to some reasons.
Thus, the cost of production could be reduced as well as the sell price of houses. This will not give a bad effect to the profit margin of the developers. Hence, the profit margin could be higher than before.
P/S : Go to this link to read the details :)
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