Thailand property market recovering but still under pressure

The condominium market in Thailand is showing signs of an early recovery as selective investors return to buying properties and real estate stocks, it is claimed.

All major developers are reporting stronger sales than expected after a dismal end to 2008 but lack of finance could end up hindering the tentative recovery, according to a report from publicly-listed Thai condominium developer, Raimon Land.

In the first few months of 2009 pre-sales more than doubled compared with the last quarter of 2008, signalling that the market has already bottomed out, the report says. The outlook for developers has also improved due to lower costs for materials and construction along with reasonably priced plots of land, it adds.

The Bank of Thailand has lowered interest rates four times since December 2008 and a government stimulus package that reduces the Special Business Tax from 3.3% to 0.11%, extends the reduction on transfer taxes from 2% to 0.01%, reduces mortgage registration fees and reduces tax on mortgage interest is having an effect.

Overall the report describes the outlook in Thailand as positive and remarks that off-plan sales, which had been negative, now have a high up-take at 73%. Indeed in some areas demand is leading to increased prices. In central Bangkok, for example, the average price per square meter is being driven upwards by the demand.

But the report also points out that some parts of the country are facing a more mixed market. In Pattaya the real estate market has suffered from a decrease in tourism numbers of 16% and the region is more susceptible to the global downturn and political unrest. Although Russian, British and Chinese investors are still buying.

Unlike in other parts of Thailand the end of 2008 was strong but in the first few months of 2009 off-plan sales dropped off 35.2%. As a result prices are falling. ‘The gap between supply and demand is widening, which along with reduced buyer confidence induced by the slow economy and domestic political instability has pushed prices down to levels not seen since late 2007,’ the report says.

‘It is fair to say we see more glossy sales brochures and property billboards than actual cranes in Pattaya,’ the report adds.

However, it also points out that the gap between finished supply and demand could guarantee strong annual returns and re-sale prices are rising. This trend is expected to continue as only a third of launches are expected to be completed in the next two years while the rest will not be finished until 2012 or 2013.

The report concludes that the Thailand property market could be boosted further through better access to funding and more foreign investment.

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