After what it described as a “steady” first half of the year, real estate agency Colliers International Thailand expects the second half of the year to be a challenging one for Thailand’s property and real estate market.
In a statement, the real estate firm noted that Thailand’s economy is progressing slower than the government expected. The growth rate has been declining since the start of the year, signifying that things are not going to plan.
While the export industry continues to stall, in contrast the tourism industry is doing well as Thailand welcomed 12,475,577 foreigners in the first five months of 2015 – a 25 percent increase from the same period last year.
In general, it said, the economy has not improved which has affected Thai people’s confidence, with the confidence index showing a continuous decline since last June.
Household debts in Thailand are still high, at about 80 percent of GDP as of the end of the second quarter. Although the growth rate of household debts is on a descending trend over the past few months, there are still many factors slowing down the economy, such as the decrease in consumption, reduced spending and unwillingness to commit to long-term debts.
Surachet Kongcheep, Associate Director at Colliers International Thailand, said that the unwillingness to commit to long-term debts has a significant impact on the real estate industry directly, as uptake is not as high as expected.
The most obvious example, he said, is the condominium market in Bangkok. Although many projects are sold out within a short time after launch, it does not mean that the market has revived. Condominiums only do well in some locations and by certain developers. There are fewer new condominiums compared to the first half of 2014 – at only 4 percent. During the second quarter of this year, 11,446 new condominium units were opened for sale.
He said: “Another factor that directly impacts the real estate industry is the fact that commercial banks are more stringent with loan approvals. The rate of rejected applications is approximately 25 percent to 30 percent.
“Ownership transfer rates have also reduced and these factors definitely affect real estate businesses.
“Another interesting point is that more than 60,000 condominium units are expected to be completed in the second half of 2015. Investors are taking precautions because if ownership cannot be transferred, then it will have other impacts.
“Sales and reservation of new projects launched during the first and second quarters are high, at about 70 percent, and many projects are sold out almost instantly, even when the price is THB 200,000 per sqm or more. However, there are also several projects that are not doing well.
“Investors are interested in projects priced around THB 50,001 to THB 100,000 per sqm, which constituted the highest ratio in the first half of this year. The number of projects priced higher than THB 200,000 per sqm has increased over the past 8 to 9 months, and such projects attract both Thais and foreigners,” he added.
Sunchai Kooakachai, Deputy Managing Director at Colliers International Thailand, said that condominium markets outside Bangkok are also intriguing.
In Pattaya, the condominium market is still recovering from the oversupply of the past three to four years. Between 2011 and 2013 more than 15,000 new units were added in the Pattaya market annually.
This number reduced to 12,500 units per annum in 2014 due to various factors, particularly economic issues in Russia which halved the number of Russian visitors to Thailand.
On the other hand, the number of Chinese tourists doubled. Although the Chinese are not replacing the Russians in purchasing condominium units, the trend is emerging. Many Chinese businesses have also come to invest in Pattaya.
The condominium markets in Cha-Am, Hua Hin and Pranburi, where the major buyers are Thais, are still steady, while Phuket’s condominium market is also slowing because he said too many units were launched during previous years.
In other cities such as Chiang Mai, Khon Kaen and Udon Thani the condominium markets are also slow, and Colliers expects the slow pace in those cities will continue for several years, and developers may need more time to complete sales of their projects.
“The real estate industry in Thailand in the second half of 2015 will not be very different from the first half because the economy doesn’t seem to be improving much, and there are not many positive factors to boost its growth,” said Surachet.
“The government is increasing its spending and is going forward with several projects, but that’s not enough to improve the economy as a whole.
“The real estate industry, especially the condominium market, will not grow much. Many operators have adjusted their plans and reduced the number of projects, focusing only in some locations.
“Out-of-Bangkok condominium projects continue to shrink from last year. Some projects have been put on hold while some have been called off as they wait for the purchasing power to return.”
