A A Housing demand model: A case study of the Bangkok Metropolitan Region, Thailand A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Pon Vajiranivesa School of Property, Construction and Project Management Design and Social Context Portfolio RMIT University September 2008 B DECLARATION I certify that except where due acknowledgement has been made, the work is that of the author alone; the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; and, any editorial work, paid or unpaid, carried out by a third party is acknowledged. Pon Vajiranivesa 29 th September 2008 C ACKNOWLEDGEMENTS I am most grateful to my supervisors, Associate Professor James Baxter and Professor Ron Wakefield for encouraging me in this research. Their valuable criticism and opinions helped me to complete the research. I also thank Naresuan University for supporting me in this PhD study by providing me with a scholarship. I gained valuable experiences from studying abroad in Australia, in a different environment, knowledge-system and language. For the useful discussions we had, I need to thank my PhD candidate friends. I will never forget the atmosphere of our beautiful Friday night academic discussions. I include Dr. Titus Mbiti from Kenya, Gabriel Nani from Ghana, Dr. Atif Ali from Pakistan, Ehsan Gharaie and Babak Abbasi from Iran, Dr. Ting Kwei Wang from Taiwan, Tracy Ng from Hong Kong and Dr. Supaporn Chalapati from Thailand. Finally, I would like to thank my family for their emphasis on education, patience, encouragement, support and lo Ze. D TABLE OF CONTENTS Declaration.............................................................................................................B Acknowledgements................................................................................................C TABLE OF CONTENTS...................................................................................... D LIST OF TABLES..................................................................................................J LIST OF FIGURES ...............................................................................................L LIST OF EQUATIONS ......................................................................................... P ABSTRACT...........................................................................................................R 1 INTRODUCTION ...........................................................................................1-1 Introduction.........................................................................................................1-1 The problem being approached...........................................................................1-2 Traditional housing-demand modelling..........................................................1-4 Important and relevance of this research ........................................................1-5 Definitions of housing demand and housing needs ........................................1-8 History of housing-demand studies and their factors .........................................1-9 The effect of demographic factors on housing demand................................1-11 The effect of economic factors on housing demand .....................................1-20 The effect of social factors on housing demand ...........................................1-22 Consequence of all factors to the model of this research..............................1-23 Model development process .............................................................................1-25 Conceptualising the research methodology and the housing-demand model1-26 Undertaking the data collection ....................................................................1-27 Analyse the results of model simulations .....................................................1-28 Research methodology......................................................................................1-28 Research objectives and aims ...........................................................................1-29 Chapter summary..............................................................................................1-33 Terminology definition of housing types in this research (for Bangkok Metropolitan Region) .................................................................1-35 2 LITERATURE REVIEW ..............................................................................2-40 Introduction.......................................................................................................2-40 E The context for a review of housing demand literature ................................2-40 Housing-demand studies and housing-need studies .....................................2-41 History of housing-demand model studies ...................................................2-43 The distinguishing features of housing (as goods in an economy)...............2-45 Summary of housing features and previous models .....................................2-48 Several approaches to the study of housing-demand study ..........................2-51 Merging demographic, social and economic factors in housing-demand studies ...........................................................................................................................2-52 Modelling methodology comparison (between Econometrics and System Dynamics approaches)............................2-54 Econometric modelling.................................................................................2-54 System Dynamics model...............................................................................2-56 An Example to illustrate the System Dynamics approach............................2-57 An econometrics approach to the same scenario ..........................................2-60 Example for Econometrics approach of the orange model...........................2-60 Controversial on Econometrics and System Dynamics....................................2-63 Housing-demand study dilemma ......................................................................2-65 Previous housing research limitations: .............................................................2-68 System dynamic approach advantage:..............................................................2-70 Gaps identified within the literature .................................................................2-73 Approach to System Dynamics.........................................................................2-75 System Dynamics introduction.....................................................................2-76 System Dynamics history .............................................................................2-77 System Thinking ...........................................................................................2-78 Systems Thinking and System Dynamics method........................................2-81 iThink software program for System Dynamics modelling..........................2-81 System Dynamics for Housing-demand study..................................................2-82 Housing demand environment from System-Thinking approach.................2-83 3 CASE STUDY BACKGROUND AND INFORMATION ...........................3-87 Introduction.......................................................................................................3-87 Physical information of case study area (Bangkok Metropolitan Region and Thailand).................................................3-87 Thailand’s Emerging Economic Policies and Strategies ..............................3-95 F Overview of housing context in Bangkok Metropolitan Region..................3-97 History of the housing market in Bangkok Metropolitan Region.................3-99 Background of housing market in Bangkok Metropolitan Region.............3-106 The role of housing in the Bangkok Metropolitan Region (BMR).............3-107 Housing in the Bangkok Metropolitan Region in the last 10 years ................3-108 Proportion of housing type in the market in Bangkok Metropolitan Region from 1996 to 2005.................................3-112 Price index of housing in Thailand .............................................................3-113 Used housing market in Bangkok Metropolitan Region.............................3-114 Population and Housing growth in the Bangkok Metropolitan Region..........3-115 Population related to housing market in the Bangkok Metropolitan Region..........................................................3-117 Distribution of housing market in Bangkok Metropolitan Region compared to Thailand as a whole..........3-119 Population and household size in Bangkok Metropolitan Region and Thailand..........................................3-120 Summary.........................................................................................................3-122 4 CONCEPT AND METHODOLOGY OF THE HOUSING DEMAND MODEL .........................................................................................................................4-123 Introduction.....................................................................................................4-123 Establishing a conceptual housing demand model .........................................4-123 Consequential concerns with the housing demand model ..........................4-129 Assumptions and