Impact of global woes limited so far

Nexus Research

Nexus Research

Low- and mid-priced segments still healthy

Of the two storms currently hitting Thailand’s property market, local political unrest has had a far greater impact than the global economic panic because most of the buyers are Thais who are affected more by events within their own country, according to Apisit Limlomwongse, managing director of Nexus Property Consultants.

People here are not really feeling the effect of the worldwide financial crisis yet because the market is already seen as being at a low point and there is not much room left for it to sink.

In Mr Apisit’s view, the property market is unlikely to decline much more even if political conflict drags on for another year because people are becoming accustomed to it. “It has sort of become part of life, they do this and that and we continue with our business. This also means the impact of global economic turbulence is not that significant because we are already down.”

Some people buying real estate actually need a home but others see an advantage in investing now because they expect prices to rise when the political showdown eases.

Meanwhile, developers too seem to be more cautious with Nexus observing that there have been fewer new project launches lately. “This could be due to many factors. For instance, things are always a bit quiet during the rainy season and add in the politics and the global economy - clearly all signs are saying don’t rush, don’t be aggressive.”

Mr Apisit noted most foreigners who buy real estate here are familiar with the country. As foreigners also tend to buy the top-tier condominiums in Thailand, consisting of units costing over 120,000 baht a square metre, it is this segment that will be hardest hit by the global meltdown. The next level, between 80,000 to 120,000 baht a square metre, is also feeling the impact of a cautious foreign stance but it is also swayed to a certain extent by local politics, he said.

It is the segment at 80,000 baht per sq m and below that seems sheltered from the political and financial storms.

Research by Nexus shows that 70% of the market stock is in the bracket at 80,000 baht and below. Of the remainder, 25% is in the 80,000 to 120,000 baht segment and very little is priced over 120,000 baht per square metre.

“Over 120,000 baht is a ‘collectors’ market’, meaning no matter how high the price is people will buy - be it 150,000 or 200,000 baht - but there are few buyers,” said Mr Apisit.

“If you wonder about this segment’s impact on the overall market, it is not substantial because the total number of units is not significant.”

He added that fewer than 30% of the market’s total stock remains unsold which at today’s sales pace, provided there are no new launches, would take one and a half years to absorb. He sees this as a healthy sign.

This 30% remaining stock totals approximately 25,000 units and the past annual take up rate in Bangkok has been approximately 20,000 units.

The takeup rate might speed up if condominium developers succeed with their new strategies. One is large discounts for cash buys or larger down payments, which seems to match the mood of the moment.

“Cash-buy discounts could be up to 5-10% if it involves a lot of property but cash buyers seem to like this package - pay more and get more discount.”

Nexus forecasts condominium prices will stay stable because developers are facing a cost push.

“It has been this way for some time now; if they had to carry out projects any cheaper they wouldn’t see any point in undertaking them. I don’t know if the drop in oil prices will help in the medium term but developers have high costs.”

It is also possible that some developers might not be able to complete their projects because banks are much stricter now. “If their bookings aren’t up to the required level they may delay it. Right now total bookings are quite important.”

Apisit: ‘‘Collectors’ market’’ at the very high end

Apisit: ‘‘Collectors’ market’’ at the very high end

Regarding other sectors, Mr Apisit sees the office market to be quite buoyant with vacancies of only 10%. “Mostly these people have a medium- to long-term outlook and it isn’t very often that they suddenly reduce their office size.”

While the retail market is being buffeted by plunging consumer spending, it is noteworthy that there is not much unoccupied retail space in the Bangkok city centre. “I don’t see this market being very affected. If there is an impact it is more to do with operators and business owners as sales drop.”

Mr Apisit warns condo speculators who are close to the transfer date that they might face difficulty in releasing their units quickly. Yet buyers can still be found because they normally have a one- to two-month grace period after being informed to take up ownership.

“This group will be able to survive because they want to sell when the project is close to completion and at this point prices would have risen by around 15 to 20%. So in the worst case they can sell at cost and still survive.”

About the author

Nina Suebsukcharoen Nina Suebsukcharoen
Nina Suebsukcharoen is a senior journalist with The Bangkok Post, Thailand's first English language newspaper and specialises in the property and real estate sector.
Other posts by Nina Suebsukcharoen ( 12 )
Website: http://www.bangkokpost.com/

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