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30 May 2023

Real Estate and Construction

Eco-friendly housing development is trending but consumers are not yet ready to pay more (Current Issue No.3415 Full Ed.)

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        Presently, property developers shift to focus more on environmentally friendly residential development. However, KResearch views that costs for green homes built with low-carbon construction/building materials remain elevated. The costs are at least 30 percent higher than the average of traditional homes, meaning that widespread adoption will take more time. At this stage, eco-friendly housing development will thus focus on energy-saving measures (such as buildings adhering to the building energy code (BEC) standard, Label No.5 houses, and solar rooftops) which cost less than complete green homes, but still more than conventional residential units. This is still considered a niche market due to its several particular conditions.

        Meanwhile, KResearch’s survey results reflect that consumers are interested in eco-friendly houses, but they are not ready to pay more. More than 71 percent of respondents are willing to pay for green housing if selling prices increase by no more than 10 percent, compared to those of traditional homes.

        Even though renewable energy consumption like solar rooftop installation is another option for long-term cost saving, 70 percent of those surveyed see such a move as not yet necessary. As installation costs remain high, they prefer other solutions with lower costs for their homes, such as use of energy-saving light bulbs/electrical appliances, and installation of light-filtering films.

        KResearch holds the view that the transition to a green housing market will be gradual. To capitalize on this trend, authorities may need to introduce incentive schemes for both property developers and consumers who wish to purchase green homes.

        Newly built energy-saving housing in Bangkok and metropolitan areas in 2023 (BEC-standard condominiums, Label No. 5 houses, houses with solar rooftop installation, use of energy-saving technologies and select eco-friendly construction materials) account for around 36 percent of total newly-built residential units in the Greater Bangkok. Most of them are condominiums and buildings with usable area of more than 2,000 square meters must be designed in accordance with BEC regulations. At the same time, most low-rise housing is mid- to high-priced single detached houses, accounting for only 2.3 percent of total newly built residential units in Bangkok and its vicinity. As costs associated with such housing developments remain high, operators have launched promotional campaigns especially for premium and niche market. Facing increased costs, developers have reduced other cost items in order to gain profit margin and close sales. (We adopt a cautious outlook due to fragile market conditions and a subdued economic recovery wherein income has yet to return to normal levels and interest rates are likely to remain elevated.)

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