First-Time Homebuyers Navigating Real Estate Industry 2023

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First-time homebuyer, purchasing a house is a major decision that requires careful consideration. The real estate industry can be intimidating, and it is important to understand the basics of buying a home before diving in.

Let's explore what are major factors to consider as a first-time homebuyer. Further we will dig deep into some trends, return of investments in the real estate industry.

What is Real Estate

First-time Homebuyers Overview Guide 2023

One of the key factors to consider when buying a house is the location. You should research the neighborhoods you are interested in and ensure that they are safe, have good schools, and are conveniently located near amenities such as grocery stores, restaurants, and public transportation.

Once you have identified a few neighborhoods you like, it is time to start looking at houses. It is important to work with a reputable real estate agent who can help guide you through the process and provide valuable insights into the local housing market.

What is Real Estate Graphic
What is Real Estate? Source

When viewing potential houses, there are several things to keep in mind. Consider the size and layout of the house, as well as any necessary repairs or renovations. You should also take note of the neighborhood and the condition of the surrounding houses.

When you have found a house you like, it is important to have it inspected by a professional to ensure that there are no hidden problems or issues that could become costly down the line.

Finally, when it comes to financing your home purchase, it is important to shop around for the best mortgage rates and terms. Work with a reputable lender who can help you find a loan that fits your budget and financial situation.

Real Estate Industry: Economic and Social Factors

Real estate industry graphic
Real estate industry a good uptrend in 2023

Real estate is a complex industry that involves the buying and selling of properties. Understanding the characteristics of real estate can help you make informed decisions when investing in property. Real estate has two categories of characteristics: economic and social factors.

Economic Characteristics:

  1. Scarcity: Although there is plenty of land in the world, the availability of land in a particular location or of a particular quality can be limited. For example, there are only a certain number of buildings that can be constructed in a given area, which can drive up demand and prices.
  2. Improvements: Building improvements on a parcel of land can increase its value, as well as the value of neighboring properties and the community as a whole.of neighboring properties and the community as a whole.
  3. Permanence of Investment: Investing in real estate can be a long-term and stable investment, with the potential for steady returns over time.
  4. Location: The location of a property is a critical factor in determining its value, as people tend to prefer certain areas over others.

Social Characteristics:

  1. Immobility: Unlike other assets, land cannot be moved. The location of a property is permanent, and buyers must consider the neighborhood and surrounding area when making a purchase.
    Indestructibility: Land is permanent and cannot be destroyed. This characteristic makes real estate a stable and valuable investment.
  2. Uniqueness: Each piece of land is unique, and no two properties are exactly the same. This characteristic makes real estate a valuable and irreplaceable asset.

When investing in real estate, it is important to consider both the economic and social characteristics of the property. The location, scarcity, and improvements made to a property can affect its value and potential return on investment. In addition, the immobility, indestructibility, and uniqueness of land make it a stable and valuable investment for the long term. With a solid understanding of these characteristics, you can make informed decisions and maximize your returns in the real estate market.

It is very important to calculate your real estate investments for first-time homebuyers in any country you are at. For example is it good to have a high overview of rental yield formula.

Real estate examples are all around us, from the homes we live in to the offices we work in, shopping centers we visit, hospitals we go to, farms we see, and much more. Even the raw land outside of our cities and the roads we use to get there are examples of real estate. It's a tangible asset that is a part of our daily lives.

How Does the Real Estate Industry Work?

The real estate industry plays a significant role in economic growth and wealth creation. Beyond the definition, the real estate business involves the development, management, ownership, and sale of assets.

From Raw Land to Asset

The real estate industry starts with raw land. Developers work with land entitlements and municipal approvals to construct assets. They may sell the land once it is fully entitled or develop the property and operate it until stabilized (typically referring to a building being 95% occupied). Asset managers help fill the property with tenants and generate cash flow.

Buying and Selling Properties

Once properties are stabilized, they can be bought and sold. Brokers, appraisers, attorneys, financiers, and other external parties help facilitate the buying and selling of properties. Over time, an influx of capital may rejuvenate or repurpose a property to create more value.

Real estate is a dynamic and constantly evolving industry with many moving parts. Understanding the basics can help you navigate the real estate industry and make informed decisions about investing in assets.

Real Estate Types

Real estate is a valuable asset that comes in different property types. There are four main types of real estate that you can invest in:

Real estate property type condo
Real estate property type condo living room

Residential: This type of real estate includes single-family homes, condominiums, townhomes, vacation homes, co-ops, and more. Residential properties can be brand new developments or hundreds of years old, and they can range from a single dwelling to multi-unit buildings like duplexes, triplexes, or quadplexes.

Commercial: Commercial properties are used for business purposes, such as shopping centers, medical offices, and apartments. They generate income for their owners and are essential for local economies.

Industrial: Industrial properties are used for manufacturing and research purposes, such as warehouses, factories, and plants. These buildings are essential for businesses that require large spaces for production, storage, and distribution.

Land: Land encompasses raw vacant land, land used for agricultural purposes like farms or ranches, and land in development stages of other real estate types. Land is a valuable asset that can appreciate in value over time.

When investing in real estate, it is important to understand the different types of properties available to you. Each type of real estate offers unique advantages and disadvantages, depending on your investment goals. Whether you are looking to invest in a residential property for rental income or purchase a commercial property for business purposes, real estate is a valuable asset that can provide long-term returns on investment.

Thailand Real Estate Industry Analysis 2023

Real Estate Industry trends in Thailand graphic
Real Estate Industry trends in Thailand graphic in 2023

According to the latest research, the Thailand real estate market is estimated to be worth USD 49 billion in 2023, with a projected Compound Annual Growth Rate (CAGR) of over 5% during the forecast period. The market has been impacted by rising inflation and economic downturns, leading to reduced demand for properties. However, the government's policies and other factors are expected to drive the market's recovery. The residential segment, on the other hand, is displaying remarkable growth.

Thailand is quickly emerging as an attractive destination for international real estate investors due to its vast business and investment opportunities. Properties in central Bangkok and other in-demand areas command higher prices, as anticipated. In cities like Bangkok, rental homes are in high demand among both tourists and long-term residents. The same applies to islands like Koh Samui and Phuket, where real estate is highly sought after by Thais, foreigners, and expatriates looking for a luxurious escape from city life.

Despite easing COVID-19 restrictions in Q3 2021, the residential property price index has experienced a constant decline, while the supply index has increased. In the first half of 2022, the retail industry continued to be impacted negatively by the spread of COVID-19, which severely affected the shopping center.

In April 2021, the Thai government launched the second phase of its one-million-unit low-cost housing scheme, with a budget estimated between THB 30 billion (USD 923 million) to THB 50 billion (USD 1.54 billion). The scheme's second phase offers lower interest rates and raises the ceiling price of housing units to THB 1.2 million (USD 36,904), up from THB 1 million (USD 30,753) in the first phase. In Q1 2022, the total office space supply in Bangkok increased to 5.56 million sq. m., as one new building with a net leasable area of 25,000 sqm was completed.

While the economic slump has led to the postponement of project launches by developers and delayed consumer sales, there is still a substantial amount of inventory, particularly for condos. These low absorption rates are a result of prolonged economic uncertainty, making customers wary of buying real estate. The market has also lost its appeal to investors and overseas buyers.

Thailand Real Estate Industry Segmentation

Real estate in Thailand is divided into five segments, namely residential, office, retail, hospitality, and industrial and logistics. A comprehensive analysis of the Thai real estate market, including an assessment of the economy and sector contributions to the economy, market overview, market size estimation for key segments, emerging trends in market segments, market dynamics, geographical trends, and COVID-19 impact, is included in the report

The Thailand real estate market is segmented by type (residential, office, retail, hospitality, and industrial and logistics) and by major cities (Bangkok, Phuket, Pattaya, Chiang Mai, Hua Hin, and the rest of Thailand). The report provides Thailand's real estate market size and forecast in USD billion for all the above segments.

Historical Returns and Expectations:

When compared to stocks, investing in real estate industry may not generate the same high returns. Over the past 80 years, housing prices have only increased by an average of 5%. However, when factoring out inflation, the increase drops to 1.5% per year. Stocks, on the other hand, typically generate an average of 7% returns per year after adjusting for inflation.

Despite this, real estate has its advantages. Unlike the stock market, the housing market experiences less volatility and fluctuations, providing a more stable investment opportunity. Additionally, owning a property can generate a passive rental income while the owner holds onto the asset.

A more informed analysis would be to compare the S&P 500 to a Real Estate Investment Trust (REIT) stock, which includes rental income year over year in its performance. From May 1996 to July 2019, the S&P 500 generated a total return of 621.8%, while the Vanguard Real Estate ETF Total Return was 865.3%. This indicates that investing in real estate has the potential for significant growth.

What's Next

Remember, buying a home is a big decision, and it is important to take your time, do your research, and work with professionals who can guide you through the process. Good luck with your home search!

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