AN EXAMINATION OF ECONOMIC RISKS PERCEPTION OF THAI REALESTATE DEVELOPERS
, Raymond Talinbe Abdulai
and Daniel Domeher
Faculty of Architecture and Planning, Thammasat University, Thailand
School of the Built Environment, Liverpool John Moores University, Liverpool, UK *Corresponding author:firstname.lastname@example.org
Economic risk plays a critical role in any investment decision making process, particularly inreal estate development projects as this directly affects project¶s income stream. This paper examinesthe Thai real estate practitioners¶ perception of economic risks caused by the several related factorssuch as financial or marketing aspects. The quantitative research approach is adopted and specifically,Explorative Factor Analysis (EFA) has been carried out. It is based on a survey of 241 Thai real estate practitioners, which was conducted inmid 2010mid-2010with a response rate of 52.5% (210 out of 400).This paper clusters the degree of economic risks into an order by using the mentionedEFAstatistical technique. It has been established that Thai practitioners are more concerned with theeconomic risks caused by variation in the price of construction materials morethan other sources of risk. Moreover, this paper underpinned that the economic risks in this industry into are mostly caused by macroeconomic, financial/monetary and marketing factors. Finally, this paper contributes theeconomic risk assessment model, which was established based on the solid statistical/mathematicalframework that suitable for the real estate industry.
: Economic risks, Explorative Factor Analysis (EFA),real estate development project, risk assessment, Thailand real estate development industry,
Uncertainties in the economic and financial environment have a significantimpact on the real estatedevelopment process, since project sponsors normally require the highest return from their investments; theyalso have to bear a relatively high economic and financial risk as well. The typical economic risks in realestate projects are caused by variationsin interest rate, loan and developer credit, sources of developmentfunds and project debt/equity ratio , , and .Normally, project sponsors require the highest life cyclevalue of the properties, which could be measured by Net Present Value (NPV) achieved from the investment, . Risks associated with economic and financial uncertainties could strongly affect the projectdevelopment process and that is why real estate professionals and academicians give precedence to economicrisks caused by these kind of financial factors , .Moreover, the marketing managerial aspects such as wrongestimation of thedemand for and supply of the properties can create an exposure toeconomic risks to real estate project ,. Other marketing risks relatedto the economic factor are the characteristics, attribution of buyers and tenants. For example, investment incommercial real estate assets delivers a return in the form of an income stream, but the income stream isuncertain to forecast because of there are many unforeseen events or risks that affect the income stream  .It is suggested that some mandatory data should be added the economic risks criterion such as the original and banks appraised value, capitalization rate from appraisal and loan to value at inception.The economic riskscould be measured by utilising a sensitivity analysis on the income/loss data of the property .Amongst other things interest rate was found to be, a significant indicator for measuring economic risks bythe developers.this is because variation in interest rate affect their earnings by influencing net interest income,