Home prices widely expected to fall in 2009

Prices for new residential prop¬erties are expected to drop between 5 and 10 per cent next year because of the falling cost of construction raw materials, property experts say.

Preuksa Real Estate's president and chief executive Thongma Vijitpongpun has forecast that the price of a residence in 2009 will be up to 10 per cent lower than a residence of the same size this year, and one of the main factors in the drop will be the price of steel, which has fallen by more than half since the first half of 2008.

Steel represents about 7 per cent of the total value of a residence, and when its price is more than halved, the overall cost of construction raw materials falls by between 3.5 and 4 per cent.

Meanwhile, homebuyers will benefit from the government's decision to extend tax incentives which expire on March 28, 2009 for another year. This will reduce the costs of buying a new home by 3 to 5 per cent.

Added together, the two factors will create the 5 to 10percent difference in the cost of a new home.

Supalai's president Prateep Tangmatitham said mortgage inter¬est rates were expected to be cut by 0.5 to 1.5 per cent next year to help homebuyers meet repayments.

Moreover, property developers can be expected to boost their sales next year by reducing prices, after they see falling sales in the final quar¬ter of 2008. As a result of all these fac¬tors Supalai expects lower residential prices in 2009, Prateep said.

Property Perfect's chief executive, Teerachon Manomaipibul, said next year would be a good time to buy a new home because most developers would be cutting prices following the fall in costs of construction raw materials in the final quarter of 2008.

"We believe that prices for lowrise residences such as detached houses, double houses and townhouses, and for condominiums, should fall between 5 and 10 per cent next year, when compared with this year," he said.

Meanwhile, property developers plan to join banks to launch special promotional campaigns to boost sales in 2009. Among other things, they will aim to help homebuyers purchase new homes on lower budgets, he said.

Sansiri's president Srettha Thavisin said land prices next year would either remain stable or fall in some locations. This is another rea¬son why residential prices will remain stable or fall in 2009.

"Next year will be a good time for homebuyers who have savings and plan to buy a new home, but have delayed their decision to buy. They will get a residence at a reasonable price, cheaper than this year for a home of the same size," he said.

According to the Real Estate Information Centre (REIC), new houses registered around the country in the third quarter of this year numbered only 113 projects or 17,000 units - a drop of 25 per cent and 13 per cent respectively from the third quarter of 2007. Of these, 82 projects with a total of 14,000 new homes were registered in Bangkok and its suburbs - a drop of 9 per cent in terms of projects and 1 per cent in terms of units over the corresponding period of last year.

Meanwhile, 284 projects with 42,000 new homes were registered around the country in the first nine months of 2008 - falling by 25 per cent and 11 per cent respectively from the first nine months of last year.

REIC director-general Samma Kitsin said the data reflected the fact that supply of residential projects would drop in the final quarter of this year, following the slump in demand.

"Following the market trend, we believed that residential prices next year may be maintained or may fall when compared with this year. This is a result of lower demand in the market, and most property developers will face the need to reduce their inventory," he said.

Samma said 2009 would be a good time for homebuyers to shop for residences in the best locations if they had savings and needed to get higher returns from their investment.

According to REIC figures, invest¬ment in property projects will enjoy returns of between 6 and 10 per cent, and this, Samma points out, is bet¬ter than depositing money in a bank.