Market Hinges on Unknowns

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The performance of the property market in 2009 depends on political stability as well as economic recovery.

Supalai Plc chairman and CEO Prateep Tangmatitham says there was clearly a negative influence on the property market from November last year to January 2009, when political confrontation reached boiling point, and he expects this year’s performance to hinge on political stability as well as economic recovery.

Although encouraging signs emerged in February and March, Mr Prateep warned that it still remains to be seen whether the property sector will fare better or worse from April to June.

“During 2009 political stability should be one of the key factors that drive the economy. If the political stand-off becomes less aggressive, then the domestic economy should grow well despite the economic recession around the world.”

While red-shirt protesters have mounted significant demonstrations in Bangkok and Pattaya, Mr Prateep expressed hope that conditions would not escalate. For one thing, he said, the protesters likely would not dare to close the airports as their yellow-shirted rivals did last year.

Should the government remain stable enough to solve economic problems through various stimulus measures geared at boosting consumption and investment, then it could succeed in spurring long-term growth, added Mr Prateep. The initiation of large infrastructure projects, such as mass transit, would help the property market, as would the extension of a property tax initiative.

While the Bank of Thailand’s moves to slash interest rates are another factor driving economic recovery, this strategy also depends on local commercial banks’ lending policies.

Although the market improved in February and March, this was not across the board. The low-rise subdivision housing segment performed adequately, but high-rise condominiums continued to register slower sales than last year.

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While there is no disputing the remarkable surge in the popularity of condominiums in recent years, Mr Prateep noted there is a clear change of sentiment on the back of substantially lower oil prices, which makes it more affordable for people to live in a single house in the suburbs. “It’s a dream to live in a single detached house - most people prefer that.”

Previously when oil prices soared above $100 a barrel, peaking at $147 in July 2008, a large number of people decided to buy a condo instead of a new car and travel by the city’s rail systems or taxis to save on commuting costs.

However, Mr Prateep added that the condominium market is not in that poor a state. Supalai recently launched a new condo project on Tivanon road near Wong Sawang and has succeeded in recording nearly 500 million baht in sales, though this volume is lower than initially obtained for similar projects last year. Supalai is, however, satisfied with the performance in this challenging year.

Of two single-house projects the company launched towards the end of last year, the one in Pathum Thani is doing better than the other in Samut Prakan, probably because it is not too far from Ratchaphruek road in Thon Buri where prices of houses are higher and the bridge spanning the river nearby is almost completed. Buyers also appreciate the fact that the project is next to the main road.

Supalai’s two new single house and townhouse projects in Phuket, one in the city centre and the other 12 kilometres away, have also done better than expected.

WARNING: Prateep Tangmatitham says the future is uncertain

WARNING: Prateep Tangmatitham says the future is uncertain

However, Best Western Premier Supalai Resort and Spa in Phuket is not performing as well this year, with both room rates and occupancy levels having dipped in keeping with a decrease in the number of visitors.

Supalai is also recording good sales in Hat Yai with its single house, townhouse and condominium projects unaffected by events in Bangkok. This company has projects in the northeast too and plans to launch its second development in Khon Kaen in the second quarter.

It is the high-end segment of Bangkok’s condominium sector that Mr Prateep sees as the hardest hit by the present problems. The reason is that most high-income people already own a house or a residential unit and were only in the market to either buy a better one or acquire another asset. As many have lost money in the stock market or are struggling to keep their businesses afloat, they would probably shelve such plans for now.

At the same time there is no sign of raw land prices dropping because landowners know full well that if they do sell and deposit the money in the bank they would get very low interest rates.

Although businesses are affected by the ongoing economic and political problems, Mr Prateep mentioned that the impact this time around is less severe than in 1997 because the minimum lending rate is approximately 6% compared with 16% then. Also, the VAT rate is 7%, and not 10% as was the case at that time.

The fact that wealthy people are not being compelled to sell their assets as they were in 1997 is another reason raw land prices have not dropped.

“It’s more difficult to get business or personal loans, but once you get them the burden is lighter than during the tom yum kung crisis - less than half of 16%, it’s 6% right now.”

Mr Prateep also revealed that his discussions with international real estate agencies indicated that foreign property buyers had almost disappeared from this country, but suggests the government wait a while before introducing measures to bring them in.

Thai buyers are compensating for this shortfall, as the good attendance at the recent housing and condominium expo at the Queen Sirikit National Convention Centre underscores. There are two chief reasons Thais are continuing to buy property,with one being the attractively low interest rates and the other the government’s tax incentives.

“This is the best time to buy if you need to buy,” said Mr Prateep.

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 ( 22 )
Website: http://www.bangkokpost.com/

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