Rates rise during 2009 as firms cancelled expansion plans and froze recruitment for all but the most essential positions. Many embarked on efficiency drives to make better use of the space they occupy and returned space which became surplus to their requirements.

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Thailand Property: Office vacancy rates in Bangkok rise.

Thailand Real Estate Outlook

Some observers are concerned that the 2008 global financial crisis may affect the Thai real estate market. Many see similarities between the current US crisis and the 1997 Thai crisis, particularly in the role played by an over-built real estate sector. To properly analyze the 2008 global financial crisis’s impact on the Thai real estate market, we should first look at the current Thai real estate environment. The Thai real estate industry has grown significantly since the 1997 financial crisis. Although speculation is prevalent in some sectors, we have not experienced a 1997 bubble-like boom. Generally, a real estate bubble occurs when property prices rise quickly in a short period, primarily from speculation – resulting in a supply-and-demand imbalance. When property prices are rising faster than the cost of money and banks continue increasing loan-to-value ratios, funding becomes easier – propelling additional speculation.
Being a developing country, the cost of property in Thailand is much lower than in the more developed European markets. But, on the other hand, prices for Thai property, in general, are rising at a much faster rate.

Real estate developers in 2009 are more cautious and many have professionalized their operations

Thailand’s property market was able to rebound from past crises and there is every reason to believe it will be able to absorb the blow of recent political tensions. The taxation situation has actually improved the conditions for purchasing property in Thailand, and if property prices do dip slightly as a result of the current situation it may actually be a good time to buy as there is a very real possibility Thailand property will regain its golden outlook soon. As a result, the financial condition of most major housing developers in Thailand is much more robust than in the past. The development of the local bond markets and increasing domestic savings has the made the industry much less dependent on foreign funds, a significant difference from 1997.

Thailand Property: Office vacancy rates in Bangkok rise.

Thailand Property: Office vacancy rates in Bangkok rise.

Any fall in domestic savings will impact Thai Real Estate Market corporate funding and investment. Mortgage loans will be more difficult to obtain : The slowing economy will force Thailand’s banks to be more restrictive in their lending practices. Mortgage loans will be more difficult to acquire with rejection rates rising. Lower supply : Responding to slowing market conditions, developers will lower their risks by building fewer homes and reducing supply. New housing supply will also be reduced because developers will have more difficulty obtaining equity, bond and credit market financing because of the global financial crisis. Investors earn income from rentals. If the economy turns bad, rental rates and occupancy rate in Thailand may fall, forcing many investors to become sellers. When speculators and investors become sellers, extra supply is thrown into the market. Demand and supply pressure are exerting negative sentiments on the Thai real estate market in 2008-2009. However, some developers view the situation as an opportunity. Small developers will react immediately to the negative consumer sentiment by reducing new housing construction, providing larger developers an opportunity to gain market share in the Thai real estate market for 2009. Large development companies with strong reputations, strong balance sheets, and higher operational efficiencies will the first to benefit once the market turns around.

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