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Bangkok’s property market impacted by Europe, China slowdown

According to Mr. Ulf Schaefer, Director of Residential Department – Premier Home, Knight Frank Chartered (Thailand) Co., Ltd, the current world events, especially the situation in Europe as well as the slowing growth in China, has many buyers and investors of real estate on edge about the future”.

Boris Sullivan

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Bangkok River Property

According to Mr. Ulf Schaefer, Director of Residential Department – Premier Home, Knight Frank Chartered (Thailand) Co., Ltd, the current world events, especially the situation in Europe as well as the slowing growth in China, has many buyers and investors of real estate on edge about the future”.

Reflecting on the recent and future situation of the Bangkok property market, Mr. Schaefer states that inventory of new residential property peaked in 2010 with about 70,000 new units. Due to the flooding and recent world events outlined earlier, developer sentiment for the future has turned cautious, resulting in decreasing supply for all market segments. New supply in the CBD area is limited due to scarce availability of land and high prices.

Bangkok River Property

Mr. Schaefer states that inventory of new residential property peaked in 2010 with about 70,000 new units

Bangkok’s property market is impacted by both external and internal forces.

These forces can be summed up as follows:

A. External:

  • Economic crisis in Europe
  • Rising debt levels in Japan
  • A slowly recovering US economy
  • Turmoil in the Middle east
  • A slowing Chinese economy and once a decade transition of leadership
  • Developments within Asean
  • Exchange rates

B. Internal:

  • A Thai economy slowly recovering from the setbacks of the recent flood
  • Thai Politics struggling to find common ground on many issues
  • Inflation  threats

There is however good supply in the city fringe and suburban areas. Prices in all areas (suburban, city fringe and CBD) have been rising, albeit slower than in the past. The CBD area has become fairly expensive with prices on average well exceeding the 100,000 per sqm, making this market segment only affordable to well heeled Thai and foreign buyers. Some new projects in prime CBD locations are commanding prices exceeding 300,000 THB per sqm.

He further commented that a fairly good supply of resale units, older and new(er),is increasingly seen as an interesting alternative to a growing number of buyers. Especially re-sales of units in projects that are nearing handover provide good opportunities to buyers looking for a new home.

On occasion a smart buyer can purchase units at below original selling price.

The lack of affordability of the CBD area has pushed many Thai buyers and expats looking for accommodations in Bangkok to consider more affordable space in the City fringe. Especially the Ratchada/Rama IX area has seen fairly strong demand.

City fringe prices are hovering between 70,000 and 100,000 per sqm. The suburban market offers a strong supply and healthy competition among its many projects, keeping prices in check and making housing the most affordable in the Bangkok area.

Mr. Schaefer concludes that the external forces will keep overall sentiment of developers on the cautious side, at least until there is some clarity on some of the external factors outlined earlier. Foreign buyers from traditional European markets will be far and few between.

New markets from within Asia will make up for this to a certain degree, especially buyers/investors from Singapore, Hong Kong and increasingly India, China and the Middle East. A weakening Thai Baht also helps spur interest from foreigners as property becomes less expensive for them in their local currency.

With the Thai economy slowly improving, an increasing number of Thai buyers will be active in all three market segments, with the strongest demand from them in the city fringe and suburban areas. Rising wages will put pressure on prices, causing inflation. This will be especially noticeable in the construction industry which relies heavily on manual labor. As a result, prices for residential properties will most likely rise.

This rise however will be somewhat dampened by the external and internal factors  as consumers worried about general economic conditions will resist significant price increases.

Knight Frank forecasts price increases of 2% in the suburban areas and 4-5 percent in the CBD and city fringe areas for the rest of the year.

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