Real demand, not speculation, driving up land
Property developers' expansion into the provinces has driven up land prices, but some believe there is little danger of an economic bubble like in 1997 because the harsh lessons of that time have not been forgotten.
Clearly, the economic boost upcountry caused by economic decentralisation and the approach of the Asean Economic Community are driving real demand for accommodation in border trading areas, said Chartchai Payuhanaweechai, vice president of Kasikornbank.
The number of condominiums upcountry is quite limited so far.
Chartchai said land speculation was not a worry because developers had learned lessons from previous bubbles, especially having more concern about real demand rather than hoarding land in hopes of bigger profits.
There is some speculation involving condominiums in Bangkok and its suburbs. However, these condos were built a couple of years ago and their prices are on the rise. Meanwhile there is little speculation on new condominiums, he said.
To prevent the problem of speculation, Chartchai said KBank would not provide credit for those wanting to buy a third residence. Also, it limits the debt level of borrowers to no more than 40 per cent of their income.
KBank allows credit for land purchases only for big operators that want to build a housing project. Even then, it will lend no more than 50 per cent of the land price. It rarely lends to small operators, except premium customers in the provinces.
Meanwhile, Thai Condominium Association president Thamrong Panyasakulwong has expressed concern that large capital inflows will result in a land-price bubble, as prices in some locations have soared by more than 400 per cent in five years.
Land around the mass-transit system on Sukhumvit Road from Phra Khanong to Bang Na has increased from an average of Bt100,000 per square wah (Bt25,000 per square metre) five years ago to Bt400,000 per square wah this year.
Real Estate Information Centre director-general Samma Kitsin said land prices were being driven by genuine demand both inside and outside Bangkok.