The new normal of real estate business
These days we cannot deny that technology has already become a part of our daily lives; from the moment we open Google Map on our smartphones to look for the best route before leaving the house to the time when we stream our favorite movies instead of waiting for them to be aired by broadcasters.
Real estate is one of the businesses that use housing technology called “Prop Tech” to create customer satisfaction and improve competitiveness in various forms such as online booking, home automation, automatic parking and delivery robot.
Apart from the change in technology, real estate business still has to face another challenge that has an impact on the working processes and turnovers in various aspects as follows:
Structure of the Thai population in 2020 - The number of people aged more than 60 years old will increase to 20% and is expected to increase even more to 30% in 2035. This means the demand of people who have enough purchasing power to buy houses will continuously decrease.
Young generation’s perspectives on lifestyles - Their views on how to lead their lives have changed as seen from the way they tend to spend more money on experience than on immovable property, change jobs more frequently and become more satisfied with working as freelancers. All of these tendencies deconstruct old beliefs like owning houses and cars which used to have deep roots in our society. Today more and more people are starting to think renting a house instead of owning one is not so bad and more convenient after all. And there is no need to own a car these days when we can use BTS or Grab Taxi. These new notions have made the car and house demands drop significantly.
Increasing household debt ratio - This heavily affects the borrowing capacity for home loans. According to the analysis, online shopping and debts in accommodations and cars are partly to blame. As a result, the debt ratio of Thais increased significantly and accounted for 78.6% of GDP in the first quarter of 2019, ranking 10th in the world. (Reference: Report on Social Situation and in Q1/2019 - Office of the National Economic and Social Development Council)
Measures from the public sector - Bank of Thailand launched a measure to control housing loans which causes consumers to obtain less loans from banks and spend more of their own money on buying a second house. Moreover, Thailand and Land and Building Tax Act B.E. 2563 increases tax burden for real estate owners. Both measures have a direct impact on the decrease of demand among those who invest in housing.
Scarcity of potential lands for development - This is because promising lands no longer have to be along the BTS/MRT lines. Many projects that are located close to the stations fail to achieve sales targets as seen from many available units near the MRT Purple Line.
Better public transportation - BTS and MRT have expanded to cover more areas outside the cities and office buildings have moved out from Central Business District (CBD). Furthermore, there is a growing popularity of working as freelancers. All of the mentioned factors cause the housing demand near workplaces in CBD to drop.
Map of Metro System in Bangkok Metropolitan Region
These challenges have completely changed the real estate businesses. They have to find a way to cope with these changes which is “Big Data Analytics.” What makes it stand out from other methods is that its analysis is based on real behaviors expressed by consumers. This is different from other traditional ways of analyzing data.
Big Data Analytics help analyze data which is beneficial to effective development planning for projects in real estate businesses. The analysis should focus on 2 aspects:
1. Location Analytics
As we all know, location is the most pivotal factor of real estate business. Developers should know the density and mobility of population in the specific areas to analyze whether they are here to stay, to work or just to visit.
When we have this information, we know the route, estimated travel time from home to office and other frequently-used routes, hang-out and shopping places. In general, people tend to choose where to live or invest in properties located in the areas that they are familiar with or frequently visit. Therefore, developers can use this sort of information to analyze which land has potential for project development.
Not only does location tell you about destinations, it also provides insights into lifestyles and other information that defines the person. For example, if this person frequently travels to a kindergarten school on working days, we can assume that there might be children in this family which is a perfect target for developers to offer a house with activity spaces for families. And if this person travels to other provinces every weekend, we can say this is a travel lover - a perfect target for selling vacation houses etc. When developers have location analytic information, choosing the right land for construction and designing projects for each product segment will become a piece of cake.
2. Customer Analytics Another challenge for real estate developers is customer demands. The digital information used in the analysis comes from the history of visitation to real estate developer websites or housing projects review websites such as Thinkofliving, Propholic and other interests in applications.
Another factor that has a direct impact on customer demands is finding the right person is not enough. We have to present the information at the right time as well. If developers can do both, solving this challenge is not a herculean task.
Even though nowadays technological changes do not have that much impact on real estate business, its new definition in Thailand hinders the growth of housing demand. When there is an economic stagnation, the existing competition of the demand that is already limited is fiercer. Thus, Big Data Analytics is an appropriate tool that real estate developers should use to upgrade strategies in every aspect in order to create competitiveness and become leaders in the industry.