Housing inventories up 10%, leading to oversupply
The inventories of property companies increased by 10 per cent from 84,058 units in the middle of last year to 92,462 units at year-end due to a sharp drop in housing demand in the final quarter, according to research by property consultant Agency for Real Estate Affairs (AREA).
At the end of last year, the combined value of inventories was Bt240 billion. Forty per cent of the 92,462 units are detached-housing projects, 26.4 per cent condominiums, 23.7 per cent town houses, and the remaining 9.9 per cent semi-detached houses and commercial buildings. AREA managing director Sopon Pornchokchai said yesterday that inventories had ended the year at a high level compared to six months earlier due to decisions by home-buyers to delay purchases of new houses, especially detached houses priced between Bt3 million and Bt5 million. According to the research, housing prices last year for the overall residential market in-creased only 0.45 per cent compared with 2005. "We believe that housing prices will be stable this year because of high competition in the market and declining demand for new houses," Sopon said. The agency expects inventories to rise to 150,000 units worth up to Bt500 billion this year, combining housing stock from last year with projects with 2007 launches. "The market's demand on average is between 60,000 and 70,000 units a year, which means the residential market will have an oversupply of up to 90,000 units this year," Sopon said. With the trend, developers have to review their business strategy and downsize the launch of new property projects this year. The research forecasts that demand for new residential property this year will be only 62,812 units - a decrease of 5 per cent compared with last year. In terms of value, the residential market will record Bt168.19 billion, down 10 per cent from 2006. The Bangkok bomb blasts on New Year's Eve also had a negative impact on home-buyers, causing them to delay decisions to buy new housing in the current quarter. As a result demand for homes may drop lower than current estimates, depending on economic policy and political stability, Sopon added. However, the research said demand for projects with homes priced lower than Bt1 million, and Bt1 million-Bt2 million, would have strong growth this year. "Demand for condominium projects at these prices will be strong, while detached housing priced between Bt2 million and Bt5 million will continue in demand, depending on location," he said. Somluck Srimalee The Nation
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