It is a paradox. While housing markets throughout Thailand as a whole are shrinking, low-priced and high-priced condominiums in Bangkok appear to be in a bubble.
Dr. Sopon Pornchokchai, President of the Agency for Real Estate Affairs (AREA) said that he is expecting that by the end of this year, the number of new condominium launches will be up 14 percent year-on-year. The reason for what he described as a “gigantic increase” is simply due to the fact that other types of housing units cannot be sold. Condominiums, he said, are a major type of property where capital gains and rental yields could be substantial.
With a note of caution, he said there is a worry about oversupply. For example, in the sector of condominium units priced below THB 1 million, 18,876 units are expected to be launched by the end of 2015. Given these units are aimed at low-income households, and the economic slowdown that Thailand is experiencing, some will remain unsold. He added that speculators are expected to purchase these units, but only as a very short-term investment.
Very recently the Prime Minister of Thailand said he would build rental and owner-occupied apartments along Bangkok’s mass-transit systems at a price of THB 300,000 per unit or at a rental price of between THB 1,000 and THB 2,000 per month. This, he said, was the help the poor out of poverty and with the costs of transportation.
Dr Sopon said: “This is not a good idea at all. There is a glut in this sector. The more promising sector is the higher-priced housing units.”
He went on to say that here are still tens of thousands of low-priced housing units held by the National Housing Authority. Around some 300,000 units are vacant or in the hands of banks and other financial institutions, as well as at many asset management companies and the Legal Execution Department.
Looking at the opposite end of the market – condominiums priced at THB 20 million or more, he noted that 2014 saw just 337 units launched with a total value of THB 9.34 billion. This year he expects at least 2,318 units with a combined value of THB 83.38 billion to be launched – a 588 percent increase in units and a 792 percent hike in value.
Although the numbers show a significant increase, Dr. Sopon said most developers are experienced and any oversupply will not become a disaster for the market as a whole.
In conclusion, Dr. Sopon said government policies to encourage the sales of lower-priced housing units or to first-time home buyers might be ineffective to help boost the economy. It will, he said, help accelerate and secure the sales of property developers.
To help the public he said that voluntary Escrow accounts should be abandoned and replaced by a compulsory one. This will help build confidence in the market, resulting in the higher speed of transactions in the market which would be a win-win situation for both developers and consumers.
