One of the most topical questions within the Bangkok residential property market is whether an oversupply situation exists.
Dr. Sophon Pornchokchai, President of Thailand’s Association for Real Estate Affairs (AREA) is unwavering in his answer. No oversupply exists in the Bangkok property market.
Dr. Sophon considered sales of housing (owner-occupied residential properties) on the open market in the Bangkok Metropolitan Region as of mid-2015. He noted there were as many as 1,634 projects offering housing units for sales, and that this number is significantly higher than Jakarta (350 projects), Manila (200 projects), Ho Chi Minh City (150 projects) and Phnom Penh (100 projects).
During mid-2015 AREA discovered there were 178,641 units being offered for sale in the market. This, it said, was a gigantic number however it is still one that can be managed by market mechanisms.
Considering absorption rates these units can be sold within 16 months. Although quite slow, Dr, Sophon said it was still not a problem.
The number of new launches was not so high to be considered an oversupply situation, and the number of 178,641 units was just 3.7 percent of total housing stock. During the Asian Financial Crisis of 1997 until 1999 the figure was 5 percent.
Dr. Sophon said the estimated number of projects being launched in the Bangkok Metropolitan Region this year would total 107,821 units – some 6 percent below the number recorded in 2014. However, he said the value would be THB 418.006 billion – some 21 percent more than the value of properties launched during 2014.
He said this is an extraordinary phenomenon, where the number is down but the value is up, however he said the phenomenon has also happened in Jakarta according the latest AREA survey.
Dr. Sopon said that looking deeper into the details, during 2015 housing units priced between THB 1 million and THB 5 million will be down by 16 percent in terms of the number of units, but up 10 percent in terms of value. This, he said, implies the majority of Thailand property sectors (75 percent) were down, due to the weakening economy of Thailand compared with the rest of the ASEAN countries.
However, he noted that for the units price below THB 1 million, the number and value will rise by 25 percent year-on-year this year.
He pointed to the luxury sector and units priced at more than THB 20 million. He described the launch activity for these projects as being very aggressive.
Last year there were 449 units with a value of THB 12.539 billion launched in this sector, but this year will see 2,166 units launched with prices above THB 20 million – four times more – with a value of THB 71,807 billion – five times more. This, he said, implies that although ordinary people are facing economic troubles, the well-to-do are still fine. They are not being impacted by economic difficulties.
Projects that have failed, in trouble or closed down account for 34,038 units at a value of THB 91.128 billion. This figure increased some 9 percent by the number of projects and 12 percent in terms of value of the development. These failed projects happened due to the fact that the developers did not conduct proper study prior to the launch, according to Dr. Sophon.
More evidence of a healthy market was the use of condominium units built during the 8th to the 36th month of completion along the mass transit lines.
Dr.Sopon found in his study during October 2015 that of the total of 114,959 units found, 82,356 units (72 percent) were already occupied; they were not left vacant. Of the total units occupied, 80 percent (65,590 units) were lived in by the buyer. Only 16,766 units were rented.
It could be assumed that two-thirds of the units met the need of the end users and therefore there will be no oversupply, Dr. Sophon said.
“An implication is that since the market is healthy, the government does not need to help the industry and there is no need to assist the home buyer.
“The best policy is ‘enabling’. This means allowing the public and private sectors to manage the housing provision themselves. No interference from the government is needed, except to regulate developers and related professionals such as valuers, brokers and the like.”