Thailand’s condo sector falls on hard times

Condominium buildings in Bangkok’s central business district © Arno Maierbrugger

Thailand’s condominium sector is bracing for a ten-year low in sales as the coronavirus pandemic continues to wreak havoc on economies around the world. The evaporation of Chinese buyers has worsened the situation and led to the postponement of new project launches and partly heavy discounts on unsold units.

The downward trend continues from last year when the Thai real estate sector was affected by a stronger baht, weaker yuan, a slowing Chinese economy and an underperforming Thai economy amid a global slowdown.

According to real estate agents, there are about 60,000 unsold condominium units in Bangkok, and it would take more than two years to release this inventory. Until the end of the year, the number could rise to 100,000.

According to Georg Chmiel, executive chairman of China-focused property portal Jumai IQI, the sentiment of the real estate industry in Thailand turned more negative as the coronavirus situation has been getting to its current serious stage.

The company made a survey among 196 Thai real estate agents in February and March this year and found that they have a generally negative outlook for residential prices over the year.

“Nationally, the industry expects prices to drop by 2.4 per cent by the end of 2020,” Chmiel said, adding that “the forecast for rentals is also generally negative. Nationally, rents are expected to be 2.6 per cent lower by the end of 2020.”

Oversupply in the condo market due to a variety of reasons

Apart from the coronavirus-induced halt of launches of new projects, Thai developers also have to deal with oversupply in the market as sales slowed last year due to the Bank of Thailand’s tightening loan policy and the effect of a new land tax deal that saw a previously flat tax rate change to varied rates depending on how a property is used.

But the sector is not completely in dire straits, it seems.

Chmiel expects that there would be a sharp rise in the market once the crisis is over as Chinese and other foreign buyers return to make new condo purchases or complete their disrupted transactions.

“Our survey shows a positive outlook after the coronavirus outbreak settles down that suggests a strong recovery between now and 2022,” he said.

The industry expects that prices will climb by 5.6 per cent by the end of 2021 from their low in 2020. Agents also believe that rents should recover their loss and gain 2.5 per cent from current levels by the end of next year.

Bangkok has the strongest forecast for transaction growth across all categories of buyers, the Juwai IQI survey found. Around 45 per cent of agents in the Thai capital expect first-time local buyers to complete more transactions in the coming year.

Nationwide, 35 per cent of agents report that foreign buyers will make more purchases in the year to come compared to 2019. Currently, foreigners account for 31 per cent of property transactions in Thailand, according to Juwai IQI, and 60 to 70 per cent of this share used to be Chinese.



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Condominium buildings in Bangkok's central business district © Arno Maierbrugger Thailand’s condominium sector is bracing for a ten-year low in sales as the coronavirus pandemic continues to wreak havoc on economies around the world. The evaporation of Chinese buyers has worsened the situation and led to the postponement of new project launches and partly heavy discounts on unsold units. The downward trend continues from last year when the Thai real estate sector was affected by a stronger baht, weaker yuan, a slowing Chinese economy and an underperforming Thai economy amid a global slowdown. According to real estate agents, there are...

Condominium buildings in Bangkok’s central business district © Arno Maierbrugger

Thailand’s condominium sector is bracing for a ten-year low in sales as the coronavirus pandemic continues to wreak havoc on economies around the world. The evaporation of Chinese buyers has worsened the situation and led to the postponement of new project launches and partly heavy discounts on unsold units.

The downward trend continues from last year when the Thai real estate sector was affected by a stronger baht, weaker yuan, a slowing Chinese economy and an underperforming Thai economy amid a global slowdown.

According to real estate agents, there are about 60,000 unsold condominium units in Bangkok, and it would take more than two years to release this inventory. Until the end of the year, the number could rise to 100,000.

According to Georg Chmiel, executive chairman of China-focused property portal Jumai IQI, the sentiment of the real estate industry in Thailand turned more negative as the coronavirus situation has been getting to its current serious stage.

The company made a survey among 196 Thai real estate agents in February and March this year and found that they have a generally negative outlook for residential prices over the year.

“Nationally, the industry expects prices to drop by 2.4 per cent by the end of 2020,” Chmiel said, adding that “the forecast for rentals is also generally negative. Nationally, rents are expected to be 2.6 per cent lower by the end of 2020.”

Oversupply in the condo market due to a variety of reasons

Apart from the coronavirus-induced halt of launches of new projects, Thai developers also have to deal with oversupply in the market as sales slowed last year due to the Bank of Thailand’s tightening loan policy and the effect of a new land tax deal that saw a previously flat tax rate change to varied rates depending on how a property is used.

But the sector is not completely in dire straits, it seems.

Chmiel expects that there would be a sharp rise in the market once the crisis is over as Chinese and other foreign buyers return to make new condo purchases or complete their disrupted transactions.

“Our survey shows a positive outlook after the coronavirus outbreak settles down that suggests a strong recovery between now and 2022,” he said.

The industry expects that prices will climb by 5.6 per cent by the end of 2021 from their low in 2020. Agents also believe that rents should recover their loss and gain 2.5 per cent from current levels by the end of next year.

Bangkok has the strongest forecast for transaction growth across all categories of buyers, the Juwai IQI survey found. Around 45 per cent of agents in the Thai capital expect first-time local buyers to complete more transactions in the coming year.

Nationwide, 35 per cent of agents report that foreign buyers will make more purchases in the year to come compared to 2019. Currently, foreigners account for 31 per cent of property transactions in Thailand, according to Juwai IQI, and 60 to 70 per cent of this share used to be Chinese.



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

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Personal Info

Donation Total: $10.00

 

 

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