Demand for Luxury Apartments Decreasing Continuously In Phuket

Over 10 housing projects with a collective market value of about Bt10 billion continue to be on hold in Phuket, for the reason that demand from both local and overseas purchasers - particularly for luxury apartments - has decreased to nearly half of that of 2008.

This drop in demand for luxury apartments in Phuket had started dropping from the beginning of the global financial recession in 2008. Both local and overseas purchasers have gone away from the market, leaving behind the development companies which are not able to sell their current condominium projects in Phuket.

The condominium, which was launched in 2008 by the development firm Surin Hill Development is of value Bt1 billion. The company launched this project with a concentration on purchasers interested in investing in Phuket. When the global slump started in 2008, most of the investors postponed or cancelled their plans. Therefore the apartments remained unsold.

The development firm Surin Hill Development is trying to discover fresh allocation channels to sell the condominium units done until now, and is modifying plans for a third stage of the development to meet alterations in demand from home-purchasers.

Even though the firm had missed its target, it was abiding with construction. Construction works of 14 units have been finished in the first stage and construction is going on in 16 units in the second stage.

Local and overseas demand for apartments in Phuket was continuously sliding down as compared to the figures of 2008. A few local investors are interested in purchasing the housing projects; however the banks refuse their loan applications. This is the most significant problem for Thai investors.

Overseas investors are till now postponing their investments in real estate projects in Thailand, particularly in Phuket, where the luxury residences mostly have high prices.

Property experts believe that the Phuket property market may get better in the last quarter of 2009 or 2010 for the reason that most of the property projects in this region concentrate on the luxury market.

Property Firms May Take a Minimum Time of 3 Years to Sell Their Property Inventory

Many property companies may take over 3 years to sell out an inventory of residences of value over Bt200 billion in Bangkok and its outer reaches for the reason of a hold back in demand happening from the economic slump.

On the other hand, a few bigger property firms consider their inventory should be sold out and producing revenue after three months for this reason, although definitely within a year. A lot of experts say their inventories are now mostly presold.

A recent survey revealed that property developers listed on the Stock Exchange of Thailand had housing inventories of a combined value of Bt178.79 billion by the final quarter of 2008, a rise of 14% over inventories of value Bt155.09 billion by the last quarter of 2007.

The leading property firm Preuksa Real Estate recorded the maximum growth of houses "in stock", with its inventory increasing by 55.55% every year worth of Bt12.6 billion by the final quarter of 2008.

Other leading property firms Supalai and Quality Houses, whose inventories increased by 34.1% and 33.1% correspondingly, by the last quarter of 2008 with values of Bt11.4 billion and Bt19.3 billion.

Real Estate Information Centre director-general said that in usual circumstances, housing inventories were fascinated by the market in 1½ -2 years. However in the present financial slump, in which buying power has decreased a lot, it may take 2 ½ -3 years to sell out housing projects.

“We consider property companies will have to enforce sales with marketing campaigns for the reason that home purchasers are postponing their decisions to purchase and are taking more time to choose a property to purchase,” he said.

When obtainable inventories were united with fresh projects launched in 2009, a few property developers could take over 3 years to sell out their projects.

Foreigners Keen to Purchase Property in Thailand

Decrease in the prices of land and housing projects have encouraged many foreigners to invest in Thailand's property market, mainly condominiums.

Foreign investors are convinced that this is the best time to purchase a property in Thailand. A few foreigners have also shown a great interest in purchasing depressed assets, which are going for 20-30% below that of 2008.

Interest is also being revealed in undeveloped land for developing housing projects, because the land prices are down by 10-20% from 2008.

Chiwathai Hub Soon, is planning to launch a low-rise condominium project of value Bt350 million, the project is named “The Surawong”. The company is all set to purchase undeveloped land and capture existing housing projects of value almost Bt1 billion in 2009 and 2010.

Thailand's property market is looking quite fascinating to foreign investors, due to the fact that prices of land and housing project are quite lower than that of 2008.

Experts believe that US economy would start recovering in the final quarter of 2009, which would in turn encourage the recovery of Thailand's economy.

Thailand property market has always been a challenge for foreign investors. Now, when land and housing prices are quite cheaper than earlier they are ready to accept the challenge.

A property management company well known as Akando Co Ltd is planning to take over housing projects, which is in construction pipeline, however, its project owner is trying to sale the project, on Rama 9 of market value Bt2 billion in 2009.

The managing director of Akando Co Ltd said that the company wants to purchase or take over projects in Thailand property market when land and housing prices have decreased a lot and a few land owners and housing project owners are going through financial troubles. Till nearly all of them have decided to reduce price for sale.

Leading Developers Ready with Fresh Sets of Housing Projects

The leading developers of Thailand are all set to launch fresh Housing projects. All these projects will be of total value approximately Bt 30 billion. This change in Thai property market is the result of improving confidence of the probable purchasers.

The Sansiri Developers, a leading property firm of Thailand is planning to launch around 11 fresh housing projects of entire value of Bt 15 billion. Among these 11 projects, 5 have been already launched.

Another leading property firm, Peurska Real Estate is all set to launch 8 fresh housing projects of entire value of Bt 5.9 billion in March 2009.

The well known property firm, Land & Houses is also going to launch 3 fresh housing projects of value Bt 3 billion in March 2009.

Asian Property Development has planned to launch 11 fresh housing projects of entire market value of Bt 17.7 billion in 2009. Among these 11 projects, it will launch one housing project of value Bt 660 million in March 2009

Even though the financial system of Thailand has dropped a lot by the global economic downturn but the demand of housing projects of value Bt 3 million to Bt 5 million is still very strong.

At the present point of time, nearly every developer wants to improve the sale. Therefore this is the perfect time for the probable purchasers to purchase apartments or residences.

Actually the developers have to try a little harder to meet the requirements of probable purchasers as the demand of residences of value in between Bt 1 million to Bt 3 million is increasing continuously.

Investors are paying attention towards the real estate sector because if they invest their money in any other investment option then they will get return of only 5% or less. However, in case if they invest the same money on a property, it will be an asset for them and they will get a return of approximately 7% - 10%.

Thailand Property Market Improving Little Bit In 2009

A leading property developer of Thailand, Puerska Real Estate Plc has observed that its sales figure has improved a little bit in the initial two months of this year. This increase in sales figure had given strength to their confidence and in the initial quarter of 2009 they are looking forward to attain a sale figure of at least Bt3 billion.

This increase in sales figure of a particular property developer firm is also showing positive signs of recovery of the entire Thai property market.

The sale figure of Puerska is Bt 1.3 billion in February 2009 and Bt 995 million in January 2009. The sale figure in December 2008 was Bt 400 million. Most of the properties sold by Puerska include single houses and town houses.

Puerska is all set to launch 22 fresh projects this year. In total this projects will be of value Bt15-18 billion. Puerska Real Estate Plc is also ready to launch its first international project in Bangalore, India. Among the remaining 21 fresh projects, 8 are all set to be launched in the first quarter of 2009. These 8 projects will comprise of approximately 2625 units of total value Bt 5.93 billion. These are 4 townhouse projects, 3 single housing projects and 1 low rise condominium project.

Several other property developer firms are also ready to launch many fresh projects in the first quarter of 2009. These projects will be of value around Bt.30 billion.

Launch of these fresh projects in the market will certainly boost confidence in the market.

Another leading developer Sansiri has already launched 11 fresh projects till now in 2009.

Land and Houses Developers have launched 3 fresh housing projects of value nearly Bt.3 billion in the initial two months of 2009.

Many other leading developers like Supalai, Asian Property Development and Pace Development etc. have launched fresh projects in the initial two months of 2009.

Real Estate Information Centre Advises Watchfulness as Liquidity Crisis Effects Developers

Thailand’s Real Estate Information Centre (REIC) director-general Samma Kitsin is advising home purchasers to put into effect more vigilance and watchfulness as an escalating liquidity crisis could compel developers to put on hold on hand housing projects.

With credit from the banks drying up, plunging sales figures are introducing a twist on the all set resources of a number of small- and medium-sized developers, said Samma.

Demand has been going down since the last quarter of past year 2008, and commercial financial institutions are at present hesitant to make available project finance for property developers.

“We cannot articulate which small and medium property firms will experience monetary troubles when the market moves downward, although the picture will turn out to be more clearer in the final six months of 2009,” he said.

In spite of the plunge in demand, Thailand’s major listed developers will be less in danger for the reason that the majority still have a build up of presold properties big in a sufficient amount to hold up upcoming revenue levels, as per Samma.

Government Centre Catches the Attention of Residential Run

The area of northern Bangkok neighboring Rama V, Rattanathibet and Chaeng Wattana Roads is mounting in significance as a centre of housing property development as this year's notch of the new Government Centre draws closer.

Developers have launched new housing projects in the area with a shared market value of approximately Bt100 billion. Half of them are detached housing projects and the leftover are condominiums and others, springing up in expectation of strong demand for close by residential when the Government Centre opens.

Both detached housing and condominium projects in the area are not astonishingly besieged at state employees whose headquarters will change when government offices shift from various parts of the city to the new centre.

The Government Centre has also fascinated an ample move into the area by private-sector organizations. The University of the Thai Chamber of Commerce, for one, plans to launch a fresh branch in Chaeng Wattana Road close to the Pak Kret junction. Well-liked department stores and discount stores are also setting up in the area, together with Central, Tesco Lotus, Big C Supercentre, and Makro. Carrefour launched on Chaeng Wattana Road a few years back. The movement has also fascinated new bank branches.

The projects put forward an extensive range of apartments priced between Bt1.5 million-Bt20 million per unit.

Sansiri started a detached-house project known as Burasiri Ratchapreuk-Chaeng Wattana, of value Bt1.2 billion, in December 2008.

Quality Houses is building two detached housing projects on Chaeng Wattana Road of value Bt2.01 billion and Bt2.5 billion.

Property Perfect decided to build both detached houses and apartments, with an entire value of Bt4 billion, on Chaeng Wattana Road close to Pak Kret junction in 2009. This will be near to the new branch of the University of the Thai Chamber of Commerce.

Asian Property Development started The City at Rattanathibet, of value Bt1.4 billion, in December 2008.

Demand for housing units, particularly condominiums, was getting ready to grow in the Chaeng Wattana Road area, although the purchasing power of the purchasers involved would be less than those looking for residences in the central business district.

Property Market Could Shrink 10-20% In 2009

For the time being, the Government Housing Bank reduced its latest home loan target for 2008 from Bt90 billion-Bt79 billion after new mortgage loan applications in last quarter of 2008 took a leap.

The bank also viewed its mortgage loan target for 2009 at a more conventional Bt73 billion after catching clues of crashing market response, GHB president Khan Prachuabmoh told.

Preuksa Real Estate president and CEO Thongma Vijitpongpun said the developer estimates that demand in greater Bangkok will go down 20% from 56,000 units in 2008 to 40,000 units in 2009.

Home purchasers will panic that their future earnings would go down after the global crisis hits the economy particularly the export and travel sectors.

“We observe demand for residences lessening since the last quarter of 2008 when our consumers visiting our housing projects decreased between 20-30%,” he said.

Though, if the new government is secure and launches policies to encourage the economy, the property market may get better in the second half of 2009, he said.

Property Perfect managing director Chainid Ngowsirimanee considers that the global slump will be less of a risk to the economy than the economic crisis of 1997 for the reason that now developers are in improved financial form.

Though, the company has to amend its business plan prior to the economic slump in 2009 by managing its cash flow and developing projects that produce cash more willingly than spend cash, he said.

Suphin Mechuchep, managing director of Jones Lang LaSalle (Thailand), said the global downturn started to upset the market in the last quarter of 2008 mainly for high rise housing projects and commercial projects.

As per the international property agency's research, rental rates for office space started to reduce in the final quarter of 2008, from an average of Bt616 per square meter per month for Grade A office early in 2008 to Bt600.

In the meantime, office space is moving towards oversupply with almost 600,000 square meters of fresh office space to be completed in 2009, together with 400,000 square meters for the new Government Centre office.

Developers Advise the Government to Increase Tax Allowances For Home Purchasers

Property developers have called on the new government to raise the tax allowance for home purchasers from Bt100,000-Bt200,000, as a means of straightforwardly growing purchasing power in 2009, at a time when customers will be hit by the global economic recession.

They also asked the government to expand long leases for foreign purchasers from 30 years to 60 or even 90 years, as a way to improve purchasing power in that section of the market.

Nobel Development managing director Thongchai Busrapan said the most successful measure that would straightforwardly do good to home purchasers would be escalating the tax allowance for those purchasing into housing projects for their first home. They put forward the existing allowance be doubled from Bt100,000-Bt200,000, which would boost their purchasing power.

“The tax allowance of value Bt100,000 has focused on purchasers of apartments valued at approximately Bt1.5 million. If the allowance is elevated to Bt200,000, that would develop the market for those purchasing more expensive apartments,” he said.

Prasert Taedullsatit, director and chief operating officer of Preuksa Real Estate, said that if the government improved the tax allowance for down payments in the first six months of 2009, it would be a reception boost for the market.

Demand for housing projects this quarter has minimized by over half from the same period in 2008. This tendency is likely to carry on until the first half of 2009. Thus, Preuksa called on the government to launch provisional measures to improve the market in the coming six months, he said.

“In case the government supports these proposals, it would honestly boost purchasing power,” he said.

“If the property market can get better, it will also assist linked businesses to develop. That sequentially would facilitate the economy endure the global financial slump,” he added.

Middle-Income Group Will Continue Purchasing

Property firm Supalai is sure of constant growth in demand for houses from middle-income earners, regardless of the global financial crisis.

It is preparing to move ahead with 12 housing projects in 2009, including 4 city condominiums, and its president Prateep Tangmatitham considers definitely that the entire property market will go down by no more than 5-10%.

Do you believe the global financial crisis will influence Thailand's property market?

We think that Thailand will get a minor pessimistic influence from global financial crisis, for the reason that Thailand's property firms are now economically strong.

The property market experienced a tough time in the 1997 economic slump, and most property firms learnt how to handle their business during a crisis. That's why most of them are now in a well-built economic condition. We consider that most of them will float through this twin crisis of global recession and political disorder.

The global financial recession will have a direct pessimistic influence on exports and the tourist division, and that may have an influence on purchasing power for the reason that people's earnings will plunge after the collapse in income from exports and the tourism division.

That may ultimately have an influence on Thailand's property market, when home purchasers postpone their decisions to purchase, or decrease their budget to purchase an apartment from Bt5 million-Bt3 million per unit.

On the other hand, this is a lesser crash for Thailand's property market this time.

Though the financial system will be distressed by the global financial slump, we consider that local demand for housing properties will keep on growing as a few factors are helping home purchasers to save costs. These consist of lower interest rates, a plunge in construction expenses and the government's tax incentives for home purchasers.

Thailand's property market in 2009 may be worse than 2008 due to a crash in purchasing power, although we think this will affect the conjecture market more than actual demand.

Demand for luxury apartments will be poorer as most purchasers in the luxury market are buying a second home. They may postpone their decision to purchase and in its place modernize their existing home.

Property Market Expected To Plunge Regardless Of Spur

The property market is likely to face a plunge of 5-10% in 2009 as Thailand gets caught up in the global financial crisis, say experts.

This will lead to a credit constrict and lower buying power.

Even though the government plans to make two times the tax allowance on property sales from Bt100,000-Bt200,000 in 2009, that will only slightly improve buying power if probable home purchasers remain worried about their future income.

Fewer transactions are estimated in 2009, although apartment prices will drop 5-10% thanks to the government's expansion of tax incentives on property sales by one more year, to March 28, 2010, and a turn down in construction-material prices.

Supalai president Prateep Tangmatitham said buying power for purchasing housing projects had already fallen considerably in the fourth quarter of 2008.

“When the government raise the tax allowance from Bt100,000-Bt200,000, that will heighten demand for residences priced between Bt1.5 million-Bt3 million, making them more striking to acquire. Though, that will hold correct only for home purchasers who are certain about their future income," said Noble Development managing director Thongchai Busrapan.

However Naporn Soonthorn-chitcharoen, senior executive vice president of property-market leader Land and Houses, is less positive. He, too, considers 2009's property market will go down 5-10%, as a result of home purchasers postponing their decision to purchase out of apprehension about future incomes.

"The government will begin a new package to elevate the tax allowance. That will boost the disposable income of existing home purchasers, as their taxable income will be deducted. However it won't encourage fresh purchases providing potential home purchasers are still anxious about their future income.” he said.

Therefore, property developers must be cautious about their cash flow before growing their investment in 2009, he said.

A lot of home purchasers have chosen the housing projects that will be complete in 2009 after other projects faced construction postponement or were even poised after encountering new limitations on commercial-bank loans in 2008, he said.

Developers Reduce Revenue Forecasts

Buyer sentiment deteriorates as economic crisis, political trouble hit spending power
Most of Thailand's property developers have modified their 2008 revenue forecasts downwards in the face of a down market that began to fall into trouble several months ago.

Potential home purchasers, with their immediate future clouded by the double effects of the global financial crisis and local political turmoil, are shying away from what is to a lot of of them the most prevalent economic commitment of their lives - purchasing a new home.
A recent study by The Nation has found that top property developers, together holding 70% of the Bt80billion property market have moved back from previous revenue targets and have set poorer figures.

Preuksa Real Estate, for instance, has modified estimated revenue down to Bt13 billion from its previous target of Bt14 billion. Land and Houses' revenue conjecture for this year is down from Bt21 billion - Bt16 billion, and Property Perfect has reduced its revenue target from Bt8 billion - Bt7.5 billion. Supalai has modified its presale target from Bt10 billion - Bt9 billion.

Property Perfect's managing director Chainid Ngowsirimanee said his company had modifdied its revenue target from Bt8 billion - Bt7.5 billion when home purchasers started postponing their decisions to purchase.

Purchasing power has fallen considerably in the last quarter of 2008, compared with the initial nine months, following protest stroke by the People's Alliance for Democracy (PAD) in closing Bangkok's airports, he said.

“Usually, the final quarter in every year is a peak season for selling housing projects; however in 2008 we have faced an unusual environment. The country's political uncertainty has had a greater pessimistic influence on Thailand's economic sentiment than the global recession,” he said.

The REIC considers that demand for housing projects with units priced between Bt2 million-Bt5 million will experience less influence from the recession as this is where current genuine demand exists in the market.

Luxury housing projects that are focused on purchasers from abroad, alternatively, will suffer a direct influence from the recession when foreign investors postpone their overseas spending.

Branded Hotel Condos Enhance Luxury Market in Thailand

Property investors in Asia are all set to pay money for their investment if a luxury branded name is joined to the development.

Branded residences encourage high levels of buoyancy due to the influential class they make available along with the security offered by direct rental and global marketing, it is declared.

They are comparatively fresh in Asia where five star hotels are working with possessors and developers to enhance accessibility and support investment.

An illustration is the current launch by a global management company of a housing project in Singapore where branded condos sold for S$4,000 per square meter which is higher than the average price of S$ 2,500 for luxury condos.

"No one had observed an investment similar to this in Singapore and they sold rapidly. People were paying money for the name and the brand," said Nigel Cornick, Chief Executive Officer of Raimon Land Public Co.Ltd, a Thai based luxury developer.

He considers it has started a movement and more of these types of investments are considered in leading areas in Thailand. Investors are also paying attention towards the better-quality returns these types of projects can distribute. Bigger projects are presenting more and more villas, apartments and a renowned hotel with condos.

In most cases the management companies either sells the residences out-and-out with the owners living onsite, or the apartment turns out to be a part of the hotel supply and in the hotel leasing pool for owners to obtain rental income. Revenue is divided in between the owners depending on the size of their investment.

Added incentives consist of the hotel brand's services like a caretaker, dry-clean, doorman, laundry, spa and private access.

"If the developer and hotel brand have an excellent reputation and a well-built track record, and they put forward sensible or exclusive designs, investor assurance is much higher. The operators can make available security, buoyancy and peace of mind for the owners, particularly when the investment is over and above US$1 million."

Luxury Detached Housing Market of Bangkok

At the same time as the luxury detached housing market in Bangkok Metropolitan Area has experienced an increase in supply, many have expressed their anxiety over saturation in the market. Though, with strong demand for luxury houses, comparatively large amount of supply would not set the market into much dilemma, should the fresh supply grow at a deliberate speed.

There were more than 5,200 luxury single houses in around 70 projects across BMR as at the end of July 2008. The average sales rate was approximately 61% with projects that were launched before 2008 observed an average sales rate of around 76%.

In general, the market has done relatively well. Demand has increased in response to Thailand’s strong economic ground rules and low interest rates which now allow consumers with a domestic income of only 110,000 baht to pay for a 7-million-baht house. And very significantly, demand is from consumer's end and there have been only a few speculators in this segment of the market. Regardless of the fact that there were approximately 40% of luxury single houses left over unsold, the greater part of unsold houses was in recently launched projects that would take some time to be captivated.

390 houses were sold monthly on an average and as per this sales rate, the number of unsold units would be zero in nearly 5 months. Though, utilizing this average sales rate to estimate the definite amount of time for houses in the existing projects to be completely sold could be deceptive.

It might take much more time for a number of units the accessible luxury detached housing projects to be sold due to a comparatively less favored location, kind of houses and project conception. In addition, as there are several fresh luxury housing projects are about to be launched, consumers will have more alternatives and the average number of unsold houses in the market will certainly be elevated.