Art of selecting the right market segment

Selecting a target mar¬ket for your business is a form of art. It is a mixture of deep knowledge of customer demographics, experience and expertise in the industry, and a vision to forecast growth of each seg¬ment of your industry, while taking into consideration your own capa¬bilities and potential in delivering goods and services.

After acknowledging these facts, I would like to share my views on Thai realestate market segmenta¬tion. This analysis will be based on current market conditions and my own experience in the property mar¬ket. My view on categorising realestate markets is to separate it using a customer's income.

First, we have to accept that more than 90 per cent of customers pur¬chase their property through mort¬gage finance. This is regardless of their wealth since mortgage financ¬ing is known to be one of the cheap¬est methods. Therefore, realestate markets should be segmented based on customer income, which will lead to an affordable price range of prop¬erty that each segment of customers can afford.

Second, we must clarify the defi¬nition of "highend" customers in Thai property markets. A large num¬ber of developers sell single detached houses worth Bt50 million to Bt100 million, and they define this group as "highend" customers. But if we really look into the details, the num¬ber of projects selling at those prices is limited. Agency for Real Estate Affairs (AREA) research shows that from a total number of 39,335 new properties on sale in the first half of this year, only 2.4 per cent sell at above Bt10 million per unit. This is an insignificant amount when com¬pared to property worth less than Bt1 million, Bt1 million to Bt2 mil¬lion and Bt2 million to Bt3 million per unit properties, which account for 15.7 per cent, 36.6 per cent, and 23.5 per cent of the market respec¬tively.

Noticeably, houses worth more than Bt8 million only account for about 3 per cent of the market. This is totally opposed to the current mar¬ket situation where many develop¬ers are focusing on this "highend" market, and attempting to further segregate this already tiny section into even smaller bits.

This leads to an interesting ques¬tion, "Is this socalled highend mar¬ket facing a state of oversupply yet?" We will all be the judge of that in a few years.