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Warning of oversupply in Bangkok Real Estate market

The Agency for Real Estate Affairs saw a slight slowdown during 2009. Its latest survey shows Bangkok has the largest number of active projects – ones with more than 20 units available – within the ASEAN region.

Daniel Lorenzzo

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Overall, the market will likely see a shift toward condominiums and away from houses or townhouses

Thailand Property Outlook – The Agency for Real Estate Affairs saw a slight slowdown during 2009. Its latest survey shows Bangkok has the largest number of active projects – ones with more than 20 units available – within the ASEAN region.

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Speaking to The Bangkok Post Dr. Sopon Pornchokchai said warning signs were apparent as 2009 was the first year since 2003 to witness a situation where the number of units being launched (57,604 units) was smaller than the number of units completed (65,282 units). He added that cheaper housing costing less than THB1.2 million is being encouraged with tax deductions from the Board of Investment, and this will also increase supply.

The Agency for Real Estate Affairs found a slight slowdown of the housing sector during 2009. Its latest survey, published this week, found 1,183 housing projects for sale in Bangkok of which 843 had more than 20 units available and are thus considered to be active projects. With the ASEAN region Bangkok has the largest number of active projects.

During 2009 there was a total of 283 residential projects launched, a decline from the 2008 figure of 331 projects. The number of 57,604 units launched was a 15 per cent decline from 2008 however the total value of projects remained the same. The average price for units launched during 2008 was THB3.17 million, and increase from THB2.71 million in the previous year.

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Thailand Property: Warning of oversupply in Bangkok market.

Thailand Investment

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.
The completion of the Suvarnabhumi-Bangkok International Airport has spurred growth in commercial property markets in eastern Bangkok as well as in the beach resort of Pattaya. Thailand has become even more accessible by air with a wide range if International carriers using Bangkok as a hub. In recent years, there has also been a surge in budge carriers, offering very competitive prices to both local and international destinations.

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

The 2008 Thai real estate market is fairly robust. However, any thorough analysis requires detailed supply and demand studies of each specific area. A thorough analysis will indicate the market risks associated with each location. The Impact of 2008 Global Financial Crisis on Thai Real Estate is invevitable. The 2008 US global financial crisis is impacting global financial and real-sector economies devastatingly. Because Thailand is inextricably linked to the global economy, it will also inevitably experience its ill-effects

Thailand Property: Warning of oversupply in Bangkok market.

Thailand Property: Warning of oversupply in Bangkok market.

The real demand for residential real estate stems from local residents and foreigners living or working in Thailand. The latter group will definitely be affected by the weak global economy but what about local Thai residents? The Thai domestic economy will also be adversely affected by the crisis, especially the export sector. The investment sector and domestic consumption in Thailand Real Estate Market will also be affected by political instability – resulting in lower sentiment and confidence. Potential home- buyers will have less money for down payments and may delay purchasing decisions. 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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