Wednesday, June 13, 2012

Caution reigns for Bangkok buyers

Global events have caused many potential buyers and investors of Bangkok property to adopt a cautious approach pending further stability.

Ulf Schaefer, Director of Residential Department – Premier Home, Knight Frank Chartered (Thailand), noted a number of factors impacting the market, including the European economic crises, rising debt levels in Japan, the slow recovery in the U.S., turmoil in the Middle East and developments within the ASEAN region.

Locally he noted Thailand’s slow recovery from last year’s floods, threats to inflation levels and a struggle to find common grounds on domestic political issues.
Reflecting on the past and present Bangkok property market, Schaefer noted that inventory of new residential property peaked in 2010 with about 70,000 new units. Due to the flooding and recent world events, developer sentiment for the future has turned cautious, resulting in decreasing supply for all market segments.

New supply in the central business district (CBD) is limited due to scarce availability of land and high prices, but he noted there is good supply in the city fringe and suburban areas.

Prices in all areas have been rising, albeit slower than in the past. The CBD has become fairly expensive with prices on average well exceeding THB100,000 (S$4,055) per sq m, making this market segment only affordable to wealthy Thai and foreign buyers. Some new projects in prime CBD locations are now commanding prices exceeding THB300,000 (S$12,160)per sq m.

Schaefer further noted that a fairly good supply of resale units is increasingly seen as an interesting alternative for a growing number of buyers. The resale of units in projects that are nearing handover provide good opportunities to buyers looking for a new home. He said that smart buyers can purchase units at below original selling prices in some cases.

The lack of affordability of the CBD has pushed many Thai buyers, as well as expats looking for accommodations in Bangkok, to consider more affordable spaces in the city fringes. The Ratchada/Rama IX area has seen fairly strong demand where prices are hovering between THB70,000 and THB100,000 (S$2,838 – S$4,055) per sq m.

Schaefer concluded that the external forces will keep overall sentiment of developers on the cautious side, at least until there is some clarity.

Foreign buyers from traditional European markets will be far and few between. New markets from within Asia will make up for this to a certain degree, especially buyers/investors from Singapore, Hong Kong and increasingly India, China and the Middle East. A weakening Thai Baht will also help to spur interest from foreigners as property becomes less expensive for them in their local currency.

With the Thai economy slowly improving, an increasing number of Thai buyers will be active in all market segments, with the strongest demand from them in the city 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, but this will be somewhat dampened by the external and internal factors as consumers - worried about general economic conditions - will resist significant price increases.

Knight Frank forecasts price increases of two percent in the suburban areas and four to five percent in the CBD and city fringe areas for the rest of this year.

View the original article here

Source From Property Guru

No comments:

Post a Comment