Bangkok home prices may fall 10%

Source : Business Times - 21 Feb 2009

Resort area and luxury sector transactions grind to a halt as foreign buyers continue to disappear

BANGKOK’S residential property prices will fall by 10 per cent this year, while resort area transactions have ground to a halt, but domestic political turmoil may have prevented a market crash, experts say. Foreign buyers, who account for around 30 per cent of Bangkok’s condominium market, continue to evaporate, leading developers to cut prices as luxury sector transactions stall. But prices will not implode by the same extent as in Singapore and Hong Kong.

‘In the past couple of years we viewed Singapore’s booming a market with some jealousy as local politics here dampened prices,’ said David Simister, chairman for CBRE Thailand, Cambodia and Vietnam. ‘But we’re now thankful that we’ve avoided the subsequent spike and crash.’

CBRE has seen a significant slowdown in transactions in the 17 off-plan projects it represents in Bangkok.

Robert Collins, managing director, Savills Thailand, said that there will be a ‘flight to quality completed projects’, and that preventing oversupply is crucial in preventing a price crash.

‘A lot of what’s being marketed is off-plan,’ he said. ‘It would be very healthy for the market for these developers to postpone or shelve their plans until existing projects have reduced their inventory. This would prevent a huge surge in the current oversupply, which would inevitably lead to a market depreciation if it took place.’

However, Bangkok prices will still drop by 10 per cent this year, said Thaninee Satirareungchai, property analyst, KGI Securities (Thailand). Early sales by investors and speculators, who account for about 20 per cent of Bangkok’s condominium market, are taking place, but there is little evidence of distress selling, she said.

‘The current situation is simply mute transactions, there’s no real distress selling as in the previous 1997 crisis.’

Bangkok-based property broker Harrisons said its condominium sales in Bangkok had recovered slightly from an exceptionally low base last quarter, which was down 70-80 per cent on the first nine months of 2008. While condominium developer Grand Unity Development slashed prices at a Bangkok project by 20 per cent to boost sales before completion this July.

Luxury property prices will be the hardest hit, but cheaper projects will continue to sell, said Ms Thaninee.

‘Pacific Star, a Singapore-based property company, still works hand-in-hand with Asian Property Development for mid-to-high-end condo developments in central Bangkok.’

‘Overall, the condo market in Bangkok would be fine as most projects are not high-end segment and, therefore, not dependant on foreign investors,’ she said.

Experts said sales in resort areas like Phuket have ground to a halt.

CBRE saw its Phuket residential transactions slump by more than 60 per cent year on year from January to four, despite making record sales in the first 10 months of 2008.

‘Phuket missed its high season last year which has led to very disappointing sales,’ said Mr Simister, ‘but we still maintain our view that the residential villa and property market remains strong in terms of long-term demand.’ Mortgage approvals continue to decline but housing loans will still grow by 6.8 per cent this year to 1.69 billion baht (S$72.7 million), down from 7.8 per cent growth in 2008, said Kasikorn Research Centre. More cautious lending could benefit lower-risk borrowers as intense competition in the loan market will see some banks build market share through refinancing by offering aggressively favourable interest rates to existing borrowers, it said.