KASIKORN RESEARCH CENTER (KResearch) has conducted a survey entitled ;Attitudes and Behavior toward Buying Pre-Owned Homes”, focusing on those intent upon buying homes for private residence. The poll does not include purchases of pre-owned residences or assets for business purposes particularly in the central business district where vacant land is scarce. The survey, was conducted October 10-26, 2006, using a sampling group of 635 career people in Bangkok. Key points noted from KResearch's poll are summarized in the following:
Bangkok Residents' Attitudes towards Pre-Owned Homes –
With regard to consumer interest in new and pre-owned homes, as much as 61.1 percent of those polled opted to buy new homes; 27.8 percent wanted to purchase pre-owned residences and 11.1 percent cited that they had not made any decision yet. The reasons most often cited by those preferring new homes over pre-owned residences included uncertainty about quality (48.7 percent), high cost of renovation (31.4 percent), superstition (11.9 percent) and other reasons (8.0 percent), as well as unattractive design (in older homes), personal preferences toward new homes and prices that do not markedly differ from those of newly-built residences.
Factors toward Pre-Owned Home Purchases –
Based on the poll, the first and foremost reason mentioned by most respondents when deciding on buying a pre-owned home was the condition of the premises, mentioned by 22.5 percent of those polled. This may be because they had to take into account additional costs for renovation. The findings also showed that prices came in second as criteria for a pre-owned home purchase, quoted by 19.8 percent of these respondents. Most viewed that pre-owned homes were less costly than newly-built residences. Third was location, accounting for 17.3 percent of those surveyed. Other factors influencing respondents' decisions toward buying pre-owned homes included the surrounding environment of the residential area, cited by 16.8 percent; design of the residence, by 11.1 percent; seller's credibility, 7.2 percent; and tax incentives/real estate fees, 5.3 percent.
Summary and Opinions
KResearch is of the opinion that factors that prohibit pre-owned homes from receiving substantial attention include the following points:
Residence quality – We have to accept some pre-owned homes in the market have rather low market potential. This is because the sellers do not want to improve upon or add value to the property because they view that it would require substantial expense to repair or renovate and the seller could have cashflow problems, inhibiting them from undertaking such costs. Home quality includes structure, electrical systems, water supply and drainage, as well as the interior condition. If these factors are unfavorable, they will be obstacles that create a bad impression.
Price – Generally, price is the second most considered factor in buying a home. It is evident that prices inhibit the sale of pre-owned homes. Sellers want to sell them at the same price they bought them for, or higher. In some cases, sellers may have bought the property during a boom, when they acquired the real estate at a rather high price. Therefore, if sellers do not sufficiently discount or moderate their prices, after the potential buyer adds any necessary repair or renovation expense, the second-hand dwelling may not markedly differ in cost from a new home enough to motivate a potential homebuyer to opt for the pre-owned residence. Moreover, at present, new houses on sale are being competitively priced because real estate entrepreneurs have turned to developing more low-to-medium priced residences in both condominiums and single-family dwellings. So, this is placing new homes squarely in competition with pre-owned homes.
Newly-built housing projects – It is evident that newly launched housing projects, and completely built-up projects are competing rather seriously in the market. Sales promotion activities have been held in many forms, e.g., pricing strategies utilized by real estate entrepreneurs who are resorting to clearance pricing. Competition on location, e.g., advertising locations along the routes where commuter trains have been or will be built are receiving great popularity. This is particularly evident with new condo projects boasting proximity to the Skytrain, etc. Moreover, even suburban housing projects are now advertising commuter train convenience as part of planned government projects.
The behavior and lifestyle of Thais differs from that seen in countries with high pre-owned home purchase rates such as the USA, UK or Australia, etc. These markets may be influenced by such factors as city planning, conservation areas or municipal codes in those countries where real estate is more systematically controlled than in Thailand. As a result, new projects in some areas would be quite difficult to start because of legal strictures.
Due to the fact that the important business centers are primarily located in cities, this causes migration of workers. In Thailand, the major business areas are clustered within Bangkok Metropolitan Area (BMA). As a result, the migration of workers out of, or away from, BMA is rather infrequent.
However, there are some important factors that cause pre-owned homes to be more competitive than some new housing projects, such as location, particularly those in downtown areas, in a location near business areas, or in central Bangkok. Pre-owned homes in these locations will remain in demand because they are cheaper than a new house in the same vicinity. In addition, vacant land on which to build a new house is scarce and expensive. And also of importance, second-hand homes on large plots in good locations are sought after by real estate developers to base new projects.
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