Property market could shrivel 10-20 per cent next year

Meanwhile, the Government Housing Bank downgraded its new home loan target for this year from Bt90 billion to Bt79 billion after new mortgage loan applications this quarter took a dive.

The bank also viewed its mortgage loan target for next year at a more conservative Bt73 billion after catching hints of falling market sentiment, GHB president Khan Prachuabmoh told the "Property at Twin Crises" seminar organised by the Thansetthakij business newspaper.

Preuksa Real Estate president and CEO Thongma Vijitpongpun said the developer estimates that demand in greater Bangkok will drop 20 per cent from 56,000 units this year to 40,000 units next year.

Homebuyers will fear that their future earnings would drop after the global recession hits the economy especially the export and travel sectors.

"We see demand for residences easing since the last quarter of this year when our customers visiting our residential projects dropped between 20 and 30 per cent," he said.

However, if the new government is stable and launches policies to stimulate the economy, the property market may recover in the second half of next year, he said.

Property Perfect managing director Chainid Ngowsirimanee believes that the global recession will be less of a threat to the economy than the financial crisis of 1997 because now developers are in better financial shape.

However, the company has to revise its business plan ahead of the economic decline next year by managing its cashflow and developing projects that generate cash rather than spend cash, he said.

Suphin Mechuchep, managing director of Jones Lang LaSalle (Thailand), said the global recession started to hurt the market this quarter especially for highrise residential projects and commercial projects.

According to the international property agency's research, rental rates for office space started to soften this quarter, from an average of Bt616 per square meter per month for Grade A office early this year to Bt600.

Meanwhile, office space is moving towards oversupply with nearly 600,000 square meters of new office space to be completed next year, including 400,000 square meters for the new Government Centre office.

Some multinational firms will also reduce their office space in Bangkok as a costcutting measure, further sending a chill through the office market next year, she said.

Now Bangkok is home to 7.7 million square meters of office space, of which 86 per cent is occupied.

Retail rents will also likely come down next year as shoppers both domestic and foreign become fewer and far between.

Demand for city condominiums has started showing signs of weakening this quarter.

"We believe that if the new government has a policy to boost investor confidence, the real estate market might recover in the second half of next year," she said.

Kiatnakin Bank president Tawatchai Sudtikitpisan said the bank would restrict both project loans and home loans in order to keep nonperforming loans under control.

"We will consider extending loans to our existing customers rather than new ones because we became worried about the financial ability to pay back the loans when we saw the country's economy showing slight growth, with more layoffs in both the export and tourist sectors expected," he said.