The Existence and Implications of Thin Real Estate Market

Abstract

This paper focuses on thin market issues in real estate appraisal. Thin market refers to low availability of comparables data from the market. The purpose of this paper is to identify the determinants and the implications of thin market towards real estate appraisal. Transaction volume is one of the most important criteria in explaining the determinants of thin market. In addition, thin market is also related to macro factors that affect residential real estate values such as demography, population, income level and economic base. This study is focused on double storey terrace houses submarket. Questionnaires were distributed to the respective local authorities to validate the issue of thin market in Tangkak, State of Johor Malaysia. The results indicate the existence of thin market in the study area. The findings show that the price bias is the most important implication in this submarket. Thus, thin market potentially leads to pricing problem in the residential market.

Ascertaining the Economic Sustainability of Heritage Property Market based on Sales Transaction Analysis

“…Lack of transaction volume will lead to unstable market price which ultimately arises thin market issues that will finally lead to bias in property valuation. This finding is supported by Junainah, Hishamuddin, and Suriatini (2011).…”

Valuation Modeling within Thin Housing Markets Case Study: Arab Housing Market in Israel

“…It has been found that the prices in a thin market are primarily downward biased. For example, a study conducted in Malaysia (Junainah et al, 2011) revealed a large gap between actual selling prices and improved assessment values, as obtained from the local authority: actual selling price was found to be much lower than the improved value. Another concern is that having access to only a minimal number of comparable transactions in a thin market increases uncertainty in the housing market and opens up opportunities for market manipulation (Nelson and Turner, 1995;Mc Millen and Weber, 2008;Hendel, et.…”

“…According to the relevant literature, a thin real estate market describes a situation in which the number of transactions is low, resulting in a lack of availability of comparable properties when undertaking an appraisal (McMillen andWeber, 2008, Genesove andHan, 2011). Moreover, a number of additional factors, such as demography, population, economic base, and income, affect housing demand and supply, meaning all property types may contribute to determining a thin market conditions (Junainah, 2011). Alongside these factors, and in view of the special characteristics of the housing market in Arab sector (i.e., limited housing mobility, multigenerational family compounds, religious affiliations and specific requirements for housing finance arrangements), and the limited number of sales transactions and insufficient information concerning the dwelling characteristics (Almog, 2009;Khamaisi, 2013), one can refer to it as a thin market.…”