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10-15% drop predicted in Thai property market

Examining trends for the real estate business this year, Thailand’s Real Estate Information Centre (REIC) held its “Property Market Outlook in 2011” seminar recently, where experts predicted a 10 to 15 per cent drop in the market for 2011, even in the face of a new zero-interest loan programme from the Government Housing Bank. Industry leaders indicated that the drop could have been as large as 20 per cent without the new policy, according to The Nation.

The programme, with a line of credit of THB25 billion (US$820.75 million), started in Q2 of 2011, and is aimed at increasing home ownership among lower and middle class earners. The loans are capped at THB3 million (US$98,451) and available for first-time home buyers only, a move designed to prevent people from using the program to make speculative purchases.

Major developer Sansiri’s executive vice president for business development projected that demand for homes in the Bangkok area would be 94,094 units, but predicted supply would be around 151,108 units.

Total residential transfers nationally are expected to be around 150,000, a significant downturn from 2010’s transfers, which came out over 200,000.

Experts cited causes such as high interest rates, rising inflation, and increased construction costs from high oil prices as factors lowering demand. The new interest-free loan programme is hoped to push those who had been considering purchasing to go ahead and buy while they are still able to take advantage.

Terdsak Thaweethiratham, a senior vice-president of Asia Plus Securities, said 14 listed property companies, which control about 60 per cent of the Greater Bangkok market worth more than THB200 billion (US$6.57 billion) annually, reported poorer results in the first quarter. They recorded net profit of only THB3.8 billion (US$124.77 million), down from THB7.6 billion (US$249.54 million) in the fourth quarter of last year.

The impact of the government’s soft-mortgage programme in the current second quarter will not boost the market’s full-year performance, he said.

However, he said the backlog – projects already sold but awaiting transfer to customers – now was THB148 billion (US$4.86 billion), which would generate about 80 per cent of total revenue this year. This would result in revenue dropping only slightly when compared with last year.

REIC director-general Samma Kitsin said 155 projects with 41,500 units had been launched in Greater Bangkok in the first four months of this year. Among the new launches, 110 projects with a total of 21,100 units were the low-rise developments, and 49 of which were launched by listed developers. About 45 condominium projects with a total of 20,400 units had been launched during the past four months.

Source: Property Report

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