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Thai Election is cooling down Property Market

The housing industry has experienced a slowdown compared with last year as a result of rising interest rates and construction costs. However, developers are anticipating more active atmosphere after the election.

Daniel Lorenzzo

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Building construction site Bangkok

There was still demand for development sties but condominium developers were possibly becoming more cautious because the market slowdown in Q1 2011, says CB Richard Ellis (Thailand) Co. Ltd

 

Although the Bank of Thailand increased the policy interest rate by 25 bps twice this quarter to 2.50% per annum, yields for property investments did not change significantly and money is still being driven into the property market due to lower yields on other fixed income investments.

Building construction site Bangkok

Thai developers are anticipating more active atmosphere after the election.

 

1-year fixed bank deposit rates at the top five commercial banks increased slightly to 1.85%-2.00% and the yields from 1-year government bonds rose to 2.5%-2.8%. Local investors sought income-producing properties with more appealing yields compared to bonds and bank deposits. When incomeproducing properties have come onto the market, there have generally been multiple bidders, demonstrating the continued level of demand for this type of property.

 

 

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The housing industry in Thailand has experienced a slowdown compared with last year as a result of rising interest rates and construction costs. However, developers are anticipating more active atmosphere after the election.

Chairman of the Thai Real Estate Association, Kittiphon Pramote Na Ayutthaya, said investment in real estate is cooling down compared with the same period last year as evidenced by a more than 50-percent drop in number of property transfers during the first quarter of 2011.

He attributed the slowdown to the rise in interest rates, costs of construction materials and overhead expenses.

Kittiphon noted that the property market was very active last year thanks to government stimulus measures, including tax incentives.

He expects that the market will become more lively after the general election and that property prices are likely to rise by five to ten percent.

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