Bangkok Office and Condominium Market

Thailand´s property market is unlikely to recover from the current slowdown until 2011, according to Aliwassa Pathnadabutr, managing director of real estate advisers CB Richard Ellis (Thailand).

The company’s research has found that transactions across all segments were down in the last quarter of 2008, and the market may retreat by 10-20 percent this year, the biggest fall since the 1997 financial crisis.

“When we saw demand in the property market dropping, we suggested to our customers that they wait and see [what happens]. As a result our customers suspended investments of between Bt4 billion and Bt5 billion in the last quarter of 2008,” said Aliwassa.

The market will only recover when the global economy itself enters a positive phase, which most analysts believe will not be before 2011.

Aliwassa is quick to point out however that the current market conditions are less critical than they were post-1997.

“We believe that this recovery cycle will be faster than that after the 1997 financial crisis because global leaders such as the US, UK, Europe, Japan and China have launched measures to solve the problem. Meanwhile, Thailand´s property developers and finance firms are healthier, financially, than they were in 1997,” she said.

“The market will only recover when the global economy itself enters a positive phase”She said the downtown condominium market was the first segment to be hit by both the global financial crisis and domestic political instability.

“Demand for downtown condominiums, especially luxury condominiums, has fallen significantly, from both domestic and foreign buyers, in the last quarter of 2008.”

[relatedposts]As of end 2008, Bangkok has between 6,000 and 7,000 unsold downtown condominium units, and this inventory will take at least two years to clear, Aliwassa said.

The commercial sector is also beginning to come under downwards pressure as multinational firms feel the full effects of the global slowdown and rein in their spending by cutting down office space and reducing staff numbers. This is likely to lead to increased vacancy rates in both the office and serviced apartments segments, predicted Aliwassa.

CB Richard Ellis (Thailand), in addition to its consultancy and research business, also acts as a real estate broker, currently managing sales for 12 residential projects in Bangkok with a combined market value of Bt25 billion. But during 2009 the company will shift its focus to smaller projects with faster sales, and concentrate more on advisory activities, explained Aliwassa.