Motivation Good for Property

“The most important problem facing Thailand's real-estate sector now is the lethargic demand subsequent to the global financial meltdown and its influence on the real economy. If the government's financial-motivation package can help develop the entire economy and as a result improve customer confidence, the real-estate sector will ultimately gain as real-estate demand is tied strongly with entire economic situation,” said Suphin Mechuchep, managing director of Jones Lang LaSalle.

Part of the package consists of motivation measures for the real estate sector.

The government plans to double the tax deduction on residence mortgages from Bt100,000-Bt200,000 and support more lending to low-income home purchasers.

“The property motivation measures increase the affordability of housing purchases and pick up the pace of the decision-making procedure. Though, we do not look forward to observe much impact from these measures, as they are improbable to help re-establish the customer confidence hurt by the constant political turmoil and reducing economic outlook. As long as customers feel unconfident about their employment and upcoming income, they are not likely to hand over themselves to any loan burden,” Suphin said.

The government should concentrate on improving the entire economy, by looking for measures to minimize impact from the global financial recession and projects that will help make jobs and increase purchasing power in all divisions. Measures to enhance the export and tourism industries are also necessary, said Suphin. More motivation to catch the attention of foreign investments may be required in order to make Thailand viable. Investment in infrastructure should also move ahead.

“Development in the entire economy will help enhance demand in both the commercial and housing property sectors,” Suphin added.

Asian Property Development CEO Anuphong Asvabhokhin also considers the latest property-motivation measures will force the market to continue growth in 2009, having faced a pessimistic influence from the local political turmoil.

“Our client visits has improved from an average of 100 visitors to 300 -400 early in 2009. This is a good symptom for the property market in 2009, after a noteworthy plunge in the last quarter of 2009," he said.

Real Estate Sector Revival In 2011

Thailand's real estate sector cannot be likely to get better from the current fall until 2011, as per managing director of international property agency CB Richard Ellis (Thailand).

She said the fall started in the final quarter of this 2008 with demand in Thailand's real estate sector plunging under the darkness of the global financial crisis.

The company's research reveals that transactions have dropped in all property segments in the recent quarter, a few of them notably, others to some extent. This is a symbol that the property market may go down by 10% to 20% in 2009, the steepest fall since the economic crisis in 1997, she said.

Though, she believes the real estate sector will get better in 2011, concurrently as the global economy recuperates from its current depression.

"We consider that this upturn cycle will be quicker than that after the 1997 economic crisis as global leaders like the US, UK, Europe, Japan and China has launched measures to resolve the trouble. In the meantime, Thailand's property developers and finance firms are recovered, economically, than they were in 1997," she said.

She said the downtown condominium market was the primary segment to be effected by both the global economic crisis and local political volatility.

"Command for downtown condominiums, particularly luxury condominiums, has dropped notably, from both local and foreign purchasers, in the final quarter of 2008," she said.

Local demand crashed for the reason that both home purchasers and investors are worried about their potential earnings, in addition to worrying that projects might not be finished.

"Local investors have sufficient cash to invest, however most of them think that residential project prices will go on to drop in 2009, therefore most of them are holding up their decisions to purchase," she said.

Foreign purchasers, alternatively, have perched investment and are holding on to their cash after feeling the direct effect of the global crisis.

Offices for rent and serviced apartments will also experience a pessimistic impact when a few multinational firms reduce their spending by cutting down office space and plummeting staff numbers, she said. This will decrease the occupancy rate of both offices for rent and serviced apartments in 2009.

Clouds Figure Out On the Skyline

Thailand's real estate sector in 2009 will come across two big effects - the worldwide economic tsunami and long-drawn-out local political troubles - regardless of encouraging signs from easing price rises, declining prices of steel and oil, and a probable expansion of the government's tax inducements.

Dark is the night as the local industry fights back to deal with a double blow that has set aside probable purchasers and investors on the sidelines.

For the local market, 2008 has been an unstable year. The market in the initial two months of the year persistent to be slow, a development triggered late 2007 by the increasing prices of oil and steel and political improbability.

The response of home purchasers improved in March after the government announced tax incentives that took effect from March 29 2008 to March 28, 2009. Sales of nearly all property developers, particularly those developing low-rise units or units set to be transferred within the period, raised in the second quarter of 2008.

But the sales detonation lasted just some months and was condensed to a drop when the People's Alliance for Democracy seized Government House in late May. Many home purchasers delayed their decisions, as they were worried about the consequences of political conflict on the economy at the same time as some probable customers were simply in no mood to purchase.

Thongma Vijitpongpun, chief executive of the listed developer Preuksa Real Estate Plc (PS), said that subsequent to rejection rates and cancellations go up, the company required to track each consumer’s payment ability and tried to fix the troubles as early as possible to re-sell the units as soon as possible.

He said the economic recession had a pessimistic impact on home purchaser’s confidence although real command still existed. Unlike purchasers in the middle-priced section and those shopping for second homes, not very lots of first-time home purchasers delayed their decisions.

He also predicts a drop in the property market development rate by 5-10% compared to 2007. “The government should encourage demand with mega projects and expand the tax incentives,” he suggested.