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What Are Primary and Secondary Markets in Real Estate?

Posted by Balaji on May 3, 2021
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All About Primary and Secondary Market

Primary and Secondary Market: When it comes to purchasing a residential property, the common question that comes to mind is, do I buy a new property or search for secondary property in a specific location?

In most cases, people buy a residential home for property investments before buying it to live in. So, as someone who is looking to buy a residential home to live in, what are the options out there?

The real estate market is usually divided into two categories: the primary market and the secondary market. Let’s look at the difference between both.

 

Primary Market

Real estate Primary sales mean when a real estate builder sells the housing units or commercial units to the investor or end-user in the primary market. It is the first sale for that particular unit. Which include new launches and ongoing projects.

 

A real estate developer will form a network of channel partners to sell housing or commercial units that the developer is building. These channel partners will promote the properties on behalf of the real estate developer, thereby generating leads and then closing the deal.

 

Secondary Market

secondary market

The secondary market is made up of secondary or sub-sale properties, previously owned houses in matured locations, and established residential areas. To further elaborate, secondary properties are properties that have been introduced into the market for rental or sub-scale which will either be rented or owner-occupied by subsequent owners.

 

The fundamental role of the secondary market is to facilitate a change in ownership at the appropriate price of an existing asset. This implies that the secondary market becomes significant as it provides the liquidity which is needed in order to further strengthen the functioning of the primary market.

 

It is normal for industry outsiders to think that the primary market, or new properties, contributes to the most number of sales, due to attractive advertising and marketing of new developments. However, contrary to common belief, the secondary property market accounts for the bulk of the volume of residential property transactions, as opposed to the primary property market. This is mainly because the secondary property market offers more choices in already established locations. Here is a list to illustrate the pros and cons of both primary and secondary properties.

 

Primary

Pros

  • Latest design
  • Lower entry level
  • High margin of finance
  • Fixed-price
  • Better choice of lots/units
  • Capital appreciation

 

Cons

  • 2-3 years for completion
  • Lower initial rent
  • Possibility of abandonment
  • Initial furbishing cost

 

Secondary

Pros

  • Negotiable
  • Immediate rental return
  • Established location

 

Cons

  • Old design
  • Repair / Maintenance
  • Price increase

 

Types of Real Estate

There are four types of real estate.

real estate market

Residential Real Estate

Residential real estate is an area developed for people to live in. It includes both new construction and resale homes. The most common category is single-family homes, but it also includes duplexes, high-value homes, multi-generational homes, and vacation homes.

As defined by local authorities, residential real estate cannot be used for commercial or industrial purposes. It also restricts how many buildings are allowed on a single block and what kinds of municipal services reach those buildings.

 

Commercial real estate

Commercial real estate (CRE) is a property that is used exclusively for business-related purposes or to provide a workspace rather than living space. Most often, commercial real estate is leased to tenants to conduct income-generating activities. This broad category of real estate can include everything from a single storefront to a huge shopping center.

Commercial real estate includes shopping centers and malls, medical buildings, educational buildings, hotels, and offices.

 

Industrial real estate

Industrial real estate refers to properties used to develop, manufacture, or produce goods and products and logistics real estate that supports the movement and storage of products and goods. Industrial real estate includes manufacturing buildings and storage like warehouses. Industrial property can only be used for industrial purposes. 

 

Luxury residential real estate

It’s crucial to understand the features that characterize luxury property before you invest. A high price tag alone won’t put a property in this category. “It has to be unique and exclusive in a good way, in a desirable way,”

 

A luxury home is all about grandeur. And the splendor shouldn’t be confined to your living space, but it should also be seen in the locality where your home is situated.

Luxury property should have good project layouts, more open and green spaces, natural lighting and ventilation, and a trove of lifestyle amenities. Consequently, features such as swimming pools, balconies with expansive views, game rooms, gymnasium, recreational spaces, etc., are now a part of the ‘expected product’ being offered to buyers by reputed developers.

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