Published on December 20, 2007
Their pessimism is based, in part, on a belief that Thailand's political problems will continue despite the election.
In making these predictions, Property Perfect's senior executive vice president Teerachon Manomaiphibul said the average price per housing unit had already fallen from Bt3 million last year to Bt2.6 million this year, a drop of 13.3 per cent. The downward momentum was expected to continue.
Home-buyers remain concerned about their future earnings, because of negative local effects from the slowing world economy; the world's economy shows signs of meager growth, because of negative effects from rising oil prices; and the US economy is suffering from the negative effects of the sub-prime mortgage crisis, he said.
Although demand for property in the domestic market will continue in 2008, most home-buyers will reduce their budgets for buying detached houses or townhouses. Many will also shift their targets to city condominiums offering cheap and convenient transport to and from work.
Teerachon said property developers were expecting to sell about 70,000 units next year, about the same as this year, but the value of that output was expected to fall 5-10 per cent.
Home-buyers will reduce the amount of money they wish to pay for homes by opting for houses with a usable floor space of only 135-150 square metres instead of the previous size of 200 square metres for a single-detached house. That will reduce the value per unit.
He said that while housing prices had recently increased 5-7 per cent, the cost of construction raw materials was expected to rise 10-20 per cent next year.
Asian Property Development CEO Anuphong Assavabhokhin said the cost of construction raw materials was rising at a time when property firms could not increase their prices because of high competition and limited demand. As a result, most developers would adjust their residential units, in terms of floor space and the amount of raw material needed in construction, to meet the ability of consumers to pay. In this way they would reduce their costs and maintain their gross margins. Demand for residential units priced less than Bt3 million has continued to grow faster than that for units priced above Bt3 million, he said.
Property developers will also have to balance their portfolios next year and offer products to meet changing consumer demand. Most home-buyers are changing away from single-detached houses and townhouses to city condominium units, he said.
Aliwassa Pathnadabutr, managing director of international property firm CB Richard Ellis, said she believed the property market would record strong growth in only three sectors next year: condominiums, industrial estates and residential projects in resort destinations like Phuket, Koh Samui, Hua Hin, Pattaya and Phang Nga.
She said these sectors were buoyed by the positive affects of government policies, including construction of mass-transit systems around Bangkok, which benefited the city condominium market; tax incentives for the eco-car project; which would boost demand for industrial estates; and strong demand from foreigners who wanted to buy second homes in heavily promoted tourist destinations.
Meanwhile, the market for single-detached houses, townhouses, offices and retail space is expected to grow only slightly.
Research by CB Richard Ellis shows the condominium and industrial sectors were the best performers in the Bangkok property market this year, recording year-on-year growth of 13.4 per cent and 40 per cent, respectively.
The housing market was weak compared with last year. The estimated number of new detached-house registrations this year will reach only 38,000 units, down 11.6 per cent from last year. Similarly, demand for townhouses has fallen about 15.7 per cent.
The firm's research shows a slow market this year for office and retail space, because of weak domestic demand. Office rental fees rose only 2.2 per cent, and the supply of retail property grew only 4.9 per cent.
Hotels, serviced apartments and expat rental apartments have also suffered a negative impact from the Kingdom's political uncertainty. The occupancy rate for hotels fell from 75 per cent last year to 70 per cent this year, for serviced apartments from 83 per cent to 79 per cent and for expat rental apartments from 89 per cent to 86 per cent.
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