Thai property market hits a slump

Thailand‘s booming property market is cooling off this year, with analysts expecting sales to remain flat due to rising interest rates and a general slowdown in the economy.

Despite strong demand for downtown condos in Bangkok and resort properties, the overall market in Thailand slumped by 4.5 percent in the seven months to July, according to Kasikorn Research Center.

Several analysts said last month’s coup could actually improve the situation in the last quarter of 2006, by ending the political turmoil that gripped the country all year.

But the coup, that ousted premier Thaksin Shinawatra, also opens up longer-term uncertainties as the new military-backed prime minister puts together a cabinet and steers the country toward elections promised for late 2007.

“Given declining inflation and oil prices, the property market should rebound in the second half of the year, even though interest rates remain high,” said Pimonwan Mahujchariyavong, Kasikorn’s head of macro-economic research.

“Although consumers’ concerns over political uncertainties have eased after the coup, we expect the property market this year would be flat at best from last year,” she told AFP. Earlier this year, the center had predicted property sales would drop by two percent from 67,800 units sold in 2005.

The signs of a slowdown were everywhere at Bangkok’s biggest real estate fair held last month, where sales were 20 percent lower than last year.

“The main reason for the decline is the economic slowdown. So far, the coup has had a limited impact on property sales, including among foreign buyers,” said Sopon Pornchokchai, managing director of property consultants the Agency for Real Estate Affairs.

Buyers put off purchases for about one week following the September 19 coup, but the situation has already returned to normal, he added.

Sopon, however, warned that longer-term political stability “remains in doubt.”

“If there is any resistance to the new cabinet, or if the coup leaders hold on to power for too long, the property market could slump for two to three years, as we have seen during major political changes in the past,” he told AFP.

But for now, the industry expects stronger sales in the fourth quarter, with interest rates seen leveling off and energy prices dropping.

“If anything, there is a sense of relief at the ending of the political uncertainty, and the tension has been removed. There is far more confidence from individual buyers in Thailand and from abroad,” said James Pitchon, executive director of Richard Ellis Thailand, the country’s biggest real estate consultant.

“We have had nobody calling up and wanting a refund of their deposit or to cancel transactions,” he said, adding that several major sales had gone through for both residential and office properties in Bangkok, project sales in Pattaya, and villa sales in Phuket.

Siam City Securities also expected increased sales in the fourth quarter.

“Recent political changes have had no impact on consumers’ decision-making or real demand in the property market. On the other hand, a clearer political situation will help speed up their decision to buy property,” it said in its recent research on the economic impact of the coup.

“In fact, interest rates are leveling off in the fourth quarter and expected to decrease in 2007. That will have more impact on their decision to buy houses” than the coup did, it said.

Source: TODAY, 08 October 2006

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