The property sector's growth this year is being put at a very modest 5 per cent as the cost of living increases in the wake of spiralling oil prices, interest rates and political conflict, experts say.

Construction expenses will increase between 5 and 10 per cent, adding an average of 5 per cent to housing prices, they say.

Sansiri Plc's president Srettha Thavisin said the market would for the rest of this year be severely competitive because of a fall in demand. He said prospective home-buyers had tightened their budgets to less than Bt5 million each, forcing developers to focus on middle-class rather than high-end clients.

Continued political uncertainty has also dented the confidence of investors, who are now inclined to wait before committing themselves, he said.

Srettha therefore halved the year's growth estimate to 5 per cent.

Anant Asavabhokin, CEO of Land and Houses Plc (L&H), spoke of greater concern about economic growth than interest-rate increases or oil prices. Even higher transport costs, with L&H suppliers demanding a 5-per-cent increase in their prices, bothered him less than the country's gloomy GDP outlook.

"Our studies in the field show that the correlation between interest rates and purchasing power is only 20 per cent. People mostly buy houses when they have confidence in the GDP, and not because of low interest rates," he said.

However, he continued to believe that the property market would fall to single-digit growth after last year's average of 10 per cent.

Chainid Ngow-Sirimanee, managing director of Property Perfect, said most clients were delaying their decisions as they were worried about the political situation.

"We believe that property sales will this year grow only 5 per cent but construction costs will increase on average to 10 per cent, which may drive housing prices up 5-10 per cent, depending on design and location," he said.

Lalin Property managing director Chaiyan Chakarakul said his company had adjusted its investment plans to three projects instead of the previously scheduled five as demand for new houses was forecast to fall 5-10 per cent this year.

"Purchasing power fell when the interest rates rose, and the oil-price rises have kept driving up the cost of living," he said.

Somluck Srimalee

The Nation