CB Richard Ellis (Thailand)'s managing director Aliwassa Pathnadabutr
Agency predicts faster resurgence than in 1997 crisis because of global moves and financial health
Thailand’s property market cannot be expected to recover from the present slump until 2011, according to Aliwassa Pathnadabutr, managing director of international property agency CB Richard Ellis (Thailand).
She said the slump began in the final quarter of this year with demand in Thailand’s property market plummeting under the shadow of the global economic 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 this year,” Aliwassa said last week.
The company’s research shows that transactions have fallen in all property segments in the current quarter, some of them significantly, others slightly. This is a sign that the property market may fall by 10 to 20 per cent next year, the steepest tumble since the financial crisis in 1997, she said.
However, she believes the property market will recover in 2011, at the same time as the global economy recovers from its present malaise.
“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.
“This is a sign that the property market may fall by 10 to 20 per cent next year”
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,” she said.
Domestic demand dropped because both homebuyers and investors are concerned about their future earnings, as well as worrying that projects might not be completed.
“Domestic investors have enough cash to invest, but most of them believe that residential project prices will continue to fall in 2009, so most of them are delaying their decisions to buy,” she said.
Foreign buyers, on the other hand, have suspended investment and are holding on to their cash after feeling the direct impact of the global crisis.
At present, Bangkok has between 6,000 and 7,000 unsold downtown condominium units, and these will take the next two years to sell, Aliwassa said. In normal circumstances, they would sell within one year.
Offices for rent and serviced apartments will also suffer a negative impact when some multinational firms reinin their spending by cutting down office space and reducing staff numbers, she said. This will reduce the occupancy rate of both offices for rent and serviced apartments in 2009.
CB Richard Ellis (Thailand)’s business plan for next year is to focus on consultancy and research that will build a database that customers can use in making decisions on investment or purchasing residential or commercial buildings.
The company will continue to maintain its brokerage business, but will focus on smaller projects with faster sales.
CB Richard Ellis (Thailand) currently manages sales for 12 residential projects with a combined market value of Bt25 billion. Its sales in the first 11 months of this year totalled Bt15 billion.
Somluck
Srimalee
The market now potentially at a crowning low, as the full impact of foreign currency movements are felt. Thailand needs to address this to encourage those buyers with funds to invest.
In my own market, Koh Samui quite dramatically in the fall in purchasing power of the GBP versus the Thai Baht. We have experience either re-negotiation of purchase prices, or buyers just pulling out of deals due to be completed in the last month. There is a severe swell in number of foreign investors in this wait and see mode.