Wealthy buyers put plans on hold

Engel & Volkers

Engel & Volkers

The country’s protracted political turmoil has had a negative impact on the luxury property market as investors and buyers hesitate to make decisions, says a broker who specialises in marketing high-end residences in Hua Hin, mainly to foreigners.

”[The property market in Hua Hin] has been so quiet [since the political problems intensified],” said Duangjai Kraus, managing director of Double 8 Realty Co Ltd, a licensed partner of Engel & Volkers (Thailand) Ltd for Hua Hin.

”Many potential customers have delayed decisions and postponed signing contracts, saying they will wait until the situation is calm down,” she said.

A handful of E&V customers, she said, had cancelled bookings of housing units worth a combined 100 million baht. Those who were investors decided not to buy additional units and wanted to sell the ones they had.

Many retired foreigners have delayed their decisions though they still have an interest in buying, as Hua Hin is now a buyers’ market, she added.

”We’ve done hard work and we spend a lot of time before getting a customer. Sometimes it takes a year before a customer makes decision. But now [the opportunity is] gone,” she said.

While the political situation is beyond the control of property marketers, Mrs Kraus says she has tried to explain to customers that governments come and go.

This is normal in politics in some Asian countries. Some customers who were familiar with Asia seemed to understand but some did not, she said.

”We need to contact our old customers as we can’t find new customers, most of whom are walk-in tourists. The property market in Hua Hin has faced a slowdown like the tourism market did,” said Mrs Kraus.

Another local property executive said political tension has been hitting the high-end condominium market the hardest in Bangkok because it is as much a foreign market as a Thai one.

With city-centre properties in particular, as soon as one gets above the five-million-baht mark there is a reliance on foreign money and if this dries up then Thailand has a problem, said the executive, who asked not to be named.

Also hurting the high-end condo segment is the fact that even affluent people around the world are becoming much more cautious about investment given he slowing global economy.

”A lot of money before was coming from the US and UK, these buyers represented quite a big percentage of buyers in the market and they are struggling with their own economies,” said the executive. ”So what happens? When times are good, say in the US, the stock market is going well, you are feeling richer, your property in the US is going up, and you say, ‘Okay, I have spare money that I can invest here.’

”But when things are going down, you feel that you have less money, you’re cutting back on everything, you definitely are not thinking about buying a second home as an investment property in another country.”

However he expects the low end of the market, with properties priced from 1-4 million baht, to be relatively immune to any downturn because there are still many people who can afford properties in this price bracket. Also, those who were previously thinking of buying more expensive units would now consider something cheaper.

Looking at Bangkok’s property market from the economic perspective is also disheartening. On the one hand, contractors and developers are facing rising costs and have to raise prices to maintain their margins. Yet at the same, affordability is an increasing issue for a growing number of prospective buyers.

”People have less money in their pockets and combined with increased difficulty in getting mortgages _ banks are being much more careful who they are lending to now both here and overseas _ it means affordability is actually going down yet prices are going up or they are under pressure to go up.

”There is disparity between what someone is willing to pay or what someone has to sell it at _ it’s just getting wider and wider.”

The executive suggested that the government encourage lenders to increase the availability of mortgages to foreigners, while also increasing the length of leaseholds to 90 years from the current 30 years plus one 30-year renewal. Unless this is done, then projects in which foreign buyers are in the majority face trouble.

Some local developers, Raimon Land Plc among them, have filled their foreign quota of 49% of the space in any given development, but are struggling to find Thai buyers for the remaining 51%. The main reason is that Thais generally prefer buying houses with land or cheaper condominiums.

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 ( 33 )
Website: http://www.bangkokpost.com/

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