Weak currencies add to impact of bloodshed
Foreign demand for Thai property will likely plummet due to the tragic ending of anti-government rallies in Bangkok last week which cost scores of lives and led to widespread rioting throughout the capital, real estate consultants say.
Patima Jeerapaet, managing director of property consultant Colliers International Thailand, said marketing activities in the property sector would continue even though the political crisis has spread nationwide and is uncontrollable.
Property activities in the second quarter will drop as April and May are traditionally a quiet period. It may take two months for local demand to pick up but foreign demand remains unpredictable.
“If everything is calm soon, it [foreign demand] will pick up in June as local demand remains strong,” he said. “But we cannot depend on foreign demand as the negative factors are not only the political turbulence but also the currency.”
After the 1997 Asian financial crisis, many foreign buyers flocked to Thailand because the baht was very weak. But Western currencies are now low, with the euro under 40 baht and the pound sterling around 46 to 47 baht.
“We cannot say when foreign demand will pick up. There are other factors like the world economy and natural disasters around the world,” said Mr Patima, also chairman of the Joint Foreign Chambers of Commerce in Thailand’s property committee.
However, a few investors are concluding deals. They tend to be local investors who are confident of a peaceful resolution to the political crisis. Some other investors are willing to take high risks for high returns.
Minor foreign investors have deserted the Thai residential market since the start of the red-shirt demonstrations in March, leaving only foreigners living in Thailand who are looking to buy, said Aliwassa Pathnadabutr, managing director of international consulting firm CB Richard Ellis (Thailand).
CBRE said some projects under its sales management in Hua Hin concluded a few transactions for residential units in the past week. Sales offices in Bangkok resumed operation on Sunday, fielding enquiries without making sales.
Ms Aliwassa said the price of condominium units in Thailand will remain stable for a while after recovering from the 2008/09 crisis. However, developers launching new projects in the near future are unlikely to set high prices.
“Buyers will continue to have the upper hand in residential markets. Although developers may not lower prices, they are likely to have strong promotional campaigns to stimulate sales,” she said.
Duangjai Kraus, managing director of the German-based property broker Engel & Volkers, said foreigners, both newcomers and frequent visitors, have lost confidence in the local property market.
In her view, a revival in the tourism sector is needed to boost the residential market. “It will take up to two years before foreigners invest again,” she said.
The company expects its sales in the second quarter to drop more than half with most deals coming from local buyers interested in distressed assets.
Ms Duangjai said now is a good time for intuitive Thai investors to acquire a land bank at a good price.
“Foreign medium- to large-sized investors will delay investment for a year to see the results of our election and the new government,” she said.
The agency is waiting to see how the government’s recovery plan for the tourism sector will support the property market in the fourth quarter and whether a new election could help solve Thailand’s prolonged political crisis.