The property market should improve this year due to progress on new mass transit routes and greater capital flows, but mitigating political risk will remain a key factor in ensuring a smooth recovery, says the Real Estate Information Center (REIC).
The strength of East Asia’s economy in part buoyed the Thai economy last year, helping the country to better cope with upheavals caused by the global financial crisis, the report said.
Economies such as China, South Korea and Taiwan, recovered quickly due to an increased influx of capital seeking the higher returns available in the region.
The rise in East Asia’s stock markets outperformed those in other regions, enabling investors to reap the gains and make investments in property, said the report.
Stimulus packages implemented in China and other countries including Thailand, aided the rebound.
More capital will flow into the region throughout 2010, especially in China whose economy is larger than Germany’s and is now ranked third in the world behind the US and Japan.
China’s economy is likely to exceed Japan’s within the next two years, the report said.
Thailand, however, is only likely to see a marginal rise in short-term capital inflows as overseas investors will remain cautious due to domestic political instability and regulatory risk relating to the Map Ta Phut issue.
While the capital flows will increase liquidity at financial institutions, banks will remain cautious over providing new loans to businesses.
The institutions are instead starting to focus on home loans, which are secured and offer lower risks than other types of loans, said the report.
Since the beginning of 2010, global oil prices rose above US$80 a barrel. If they continue this upward trend, transport and construction costs will rise.
Domestic inflation rates will be revised up in the first quarter and will be significant in the second quarter. It is possible that the government will adopt a monetary policy by gradually increasing the policy rate from the second or third quarter.
“Any impact from rising interest rates this year on the residential market will be minimal, but it will be greater next year if the rates increase further,” it said.
REIC said the Purple Line mass transit project from Bang Sue to Bang Yai is included in the Thai Khem Kaeng investment programme. Construction was scheduled to start this year and be completed within five years.
“When property developers and consumers see its [the Blue Line's] construction, they will be more interested in housing projects along the line. As a result, land prices will be likely to increase and more housing projects near the stations will add in the market.”
The government recently announced its plans to upgrade Thailand’s outdated railways which could include shifting the central station from Hua Lamphong to Bangkok’s outskirts.
Sales of low-end properties, priced at about one million baht, would be particularly active this year as developers plan to launch more than 10,000 units under the Board of Investment’s Home programme.
Baan Ua-arthorn low-cost housing projects will increase supply by another 40,000 to 50,000 units this year. REIC expects more than 80% of the low-end properties will be condominiums.
“There is a trend that Thais will have more than one house. Their second house will be used as a temporary residence near schools for their children or for investment,” the report said.
Developers are facing negative factors such as a slight decrease in purchasing power caused by a possible increase in inflation and interest rates. Stricter environmental regulations will also limit project development, but would improve the quality of life of residents in the long run, the report said.
Nina
Suebsukcharoen
