June 18, 2012 00:00 By Somluck Srimalee
Capital showing strong signs of recovery after last year's flood crisis
Developers and property agencies believe the Greater Bangkok real-estate market in the second half of the year will improve, driving overall market growth to 3-5 per cent for all of 2012.
The market has shown signs of recovery in the current second quarter after experiencing slow growth in the first quarter due to last year’s flood disaster.
According to research by Knight Frank Chartered (Thailand) Co, residential prices will likely increase by 2 per cent in the Bangkok suburbs and 4-5 per cent in the central business districts (CBDs) and outskirts during the remainder of the year. However, Thailand’s property market will face negative impacts from both internal and external factors.
The director of the company’s residential department, Ulf Schaefer, said negative external factors included the economic crisis in Europe, rising debt levels in Japan, slow recovery of the US economy, turmoil in the Middle East, a slowing Chinese economy amid this year’s leadership transition in that country, and exchange rates.
Internal factors include slow recovery of the Thai economy after the floods, politics struggling to find common ground on many issues, and inflation threats.
Few buyers from Europe
The research said that as a result of the economic problems in Europe, buyers from traditional European markets would be few and far between. But Knight Frank believes that demand for property in Thailand will come from Asia countries, especially buyers and investors from Singapore, Hong Kong and increasingly India, China and the Middle East.
A weakening baht also helps spur interest from foreigners as property becomes less expensive for them in their local currencies.
With the Thai economy slowly improving, an increasing number of Thai buyers will be active in all three market segments, with the strongest demand in the Bangkok fringe and suburban areas.
Rising wages will put pressure on prices, causing inflation. This will be especially noticeable in the construction industry, which relies heavily on manual labour.
As a result, prices for residential properties will most likely rise. However, this will be dampened somewhat by the above-noted negative factors as consumers worry about general economic conditions and resist significant price increases.
Meanwhile, developers also believe that demand to buy homes started recovering in the current quarter and will continue through the second half.
LPN Development chief executive officer Tikhamporn Plengsrisuk said demand for homes in metropolitan Bangkok was still growing strongly, especially those priced lower than Bt2 million.
The company enjoyed presales worth Bt6 billion in the first five months of the year, and targets Bt10 billion for the first half, towards a full-year target of Bt16 billion, Tikhamporn said.
Property Perfect’s assistant chief business development officer, Tongchai Peyasantiwong, said the company forecast demand for homes at about 80,000-100,000 units, or growth of about 5 per cent from last year. This is because demand is recovering after many people delayed their decisions to buy in the final quarter of last year when the flood hit.
Demand for land grows
Meanwhile, the demand for undeveloped land in the CBDs has continued to grow.
According to a report by Colliers International, the company sold Bt1.2 billion worth of land to property developers last month on New Phetchaburi and Srinakarin roads. It is also negotiating the sale of undeveloped land worth more than Bt3 billion on Sukhumvit Road.
“We have also been appointed sales agent for 1.5 rai of land on Sukhumvit Soi 55 [Soi Thong Lor]. This shows that the demand for land to develop residential projects is experiencing strong growth,” Colliers executive manager Nukarn Suwatikul said.
The Agency for Real Estate Affairs reported the launch of seven new residential projects worth Bt17.99 billion in May, up Bt4.44 billion from April. Up to 76 per cent of the total was condominium projects, recording 4,284 units, followed by 832 townhouse units and 488 detached houses.
Homes priced between Bt1 million and Bt2 million were popular sellers.