EXTERNAL ENVIRONMENTS OF REAL ESTATE MARKET

Objective:

To discuss:

Outer market elements that impinge upon a particular property development.

Their importance to real estate market research.

Expected results:

  Understand the external environments of

real estate market; Can explain the main elements of these

environments; Can appreciate the influence of these

elements on real estate market research.

Definition

A milieu in which the factors and forces that are external to the management functions of a firm impinge upon the company’s ability to develop and maintain successful business.

Socio-cultural environment, technological environment, economic/competitive environment and, political and legal environment affecting business (STEP)

Real Estate Market Environment

Immediate Outer Environment

Market research & marketing consulting firms Financial intermediaries Customers Competitors General public

Immediate Outer Environment

Market research & marketing consulting firms * Market study * Feasibility study * Marketing Financial intermediaries * Loan margin * Borrowing cost * Lending policies

Immediate Outer Environment

Customers * Which target (individual, group, institution)? * Type (e.g. first-time, non first-time)? * Needs, wants, choices, preferences? * Affordability? * Behavioural aspects? * Cultural aspects?

Immediate Outer Environment Competitors * Who are they? * What are producing? * How, how much, and where? * What are they offering? * What are their marketing strategies, especially with respect to the 4P’s? Identify gaps in opportunities, secure a certain

market position, fill the gaps, and, subsequently, capture the market share.

Immediate Outer Environment

General public * Who are they? * What are their roles and functions? * How do these roles and functions affect company’s business or project?

Outer Environment

Demographic Market/Economic Cultural Political

Outer Environment

Population * size * quality * distribution * growth prediction Supply and demand

Outer Environment

People’s affordability * income * property price * credit facilities * interest rate * amount of saving Lack of affordability → discourages DD

Property Price, Consumer Income, and Buyers’ Affordability

Outer Environment Culture: psycho-sociological and/or socio- psychological Psycho-sociology… * Consumer behaviour (e.g. preferences) * Norms and values * Belief Socio-psychology… * Lifestyle * Perception

Outer Environment

Political * Government policies * Government regulations Have “ripple” effects Tend to raise developer’s costs

Importance to Market Research

Researching STEP fundamentals Market forecast Continuous flow of information

Summary Market environment: a milieu in which factors and forces

that are external to the management functions of a firm impinge upon the company’s ability to develop and maintain successful business.

Immediate market environment: various groups of customers and the general public.

Outer environment: demographic, economic environment; cultural environment; and the political environment (STEP)

Significant implications to market research: Researching the STEP fundamentals Market forecasting Continuous information

Thank you!