The property sector will recover next year, along with an improvement in purchasing power, as interest rates begin to stabilise and inflation slows, according to the Kasikorn Research Centre (KRC).

It expects that inflation, down to 3.1 per cent on average in the last half of 2006 from 5.9 per cent in the first half, will continue to fall next year to an average of 3.3-3.8 per cent.

Interest-rate stability will, the research house says, allow more effective expenditure planning. The Fed may lower its key interest rate by 0.5-1.25 per cent next year, and slowing Thai inflation will give the Bank of Thailand flexibility in monetary policy. It thinks commercial banks' rates will drop in 2007 to 0.75 per cent before rising along with demand for credit, thus decreasing liquidity.

Political stability is also seen as improving, leading to consumer confidence and relieving the present depressed economy in the run-up to elections.

KRC urges home-buyers to consider not only the quality and location of a project, but also credit conditions, since fixed interest is not as attractive as floating interest in the downward trend expected by most financial institutions, except when a project offers a lower rate than the prevailing one, discounting towards the probable later rate.

Developers' marketing strategy is focusing on the low-end to middle market, where the centre sees demand remaining high, particularly for condos near the Skytrain and in the city centre, of which there has recently been a building glut such that their movement will bear monitoring.

Despite the better outlook for the economy as a whole, condos will be riskier for developers than horizontal projects, because they will take more time to build per unit, KRC warns. That said, cheapness will not be all. Low- to middle-income customers are more sensitive to a slowing economy, and developers who seek out this segment should carefully consider the launch of each project.