Foreign Property Contracts Freezing Up

Internal political troubles are having a greater collision on the Thai property market than the financial economic recession, with no transactions made by overseas purchasers and investors so far in this conventionally high season, said Duangjai Kraus, managing director of the Hua Hin branch of the property consultant Engel & Volkers Ltd.

She said many overseas purchasers did not seem to get units after booking or making a down payment. Worse, a few decided to return units at the same time as fresh deals had vanished as purchasers decided to wait and watch.

Potential purchasers together with Britons stepped back as they were also experiencing a financial slump at home. However Scandinavians, who frequently visit Hua Hin, still visit their second homes in the beach town.

“Usually from October to February, we are very active with a huge number of property transactions although in 2008 the number of deals dropped by 70-80%,” she said.

She added the company might undergo approximately 500 million baht in lost sales all through the 3 months.

The hotel business in Hua Hin is also experiencing a fall in occupancy rates in spite of recuperation to 60-70% in November, with one luxury hotel single-handedly receiving postponement of 80 rooms.

One of the big deals under conciliation is the attainment of a golf course by a South Korean who planned to use up approximately 700 million-2 billion baht. In October, he checked out a number of golf courses in Bangkok, Hua Hin, Pattaya and Chiang Mai.

“Although he did not authenticate when he would visit again to assess the possible golf courses prior to making the ultimate decision,” said Mrs Duangjai. “He is also looking for a golf course in Vietnam and he might purchase it.”

As local political uncertainties have not been determined, she said the company did not get any criticism from an investor from the United Kingdom who wanted to purchase a big plot of land to build up a golf course and another one from the United States who wanted to capture a hotel or resort. Both deals would be of value around 1 billion baht each.

“It might take minimum 2 years to recreate the buoyancy. Everything should get better by the first quarter of 2009 so that we will be organized by mid 2009 to completely welcome a return of purchasers, investors and guests in the next high season,” Mrs Duangjai said.

Foreign Investor Curiosity in Thai Property Declining

The worldwide economic recession is having influence on the Thai property market as a Singaporean investor recently taken out an investment in a project on Sukhumvit Road, said Patima Jeerapaet, managing director of the property consultant Colliers International Thailand.

He said land and condominium values in the central business district (CBD) and Sukhumvit Road's early sois will turn down because of flaccid foreign command.

As per a Colliers database, more than 60% of foreign purchasers getting hold of a condominium unit priced at 180,000 baht a square meter were from the financial division. Number of them were investment bankers or investors gaining earnings from the finance business or the stock market and changing into the property sector.

“Foreign purchasers in front of a financial crisis have to sell property as promptly as possible. A few of them may sell at asking price or with a lower than predictable margin. This will cause decreasing prices however fresh purchasers are coming up. The prices will not be to the degree that considered.”

He said sensible prices for grade-A condominium units in the CBD and Sukhumvit Road close to the BTS skytrain should be amid 90,000-120,000 baht a sq m and 65,000-80,000 baht for grade B+.

Anant Asavabhokhin, president and chief executive officer of the country's leading developer Land & Houses Plc, said land prices in the Sukhumvit area raised to 500,000 baht a square wah from 300,000 baht in just 3 years.

He confirmed that land prices in the inner city would certainly decrease as rising prices in the earlier period were determined by foreign investors, generally from Hong Kong and Singapore. Simultaneously, condominium units on Sukhumvit Road close to the BTS skytrain, prices of which were at present cited at 130,000-140,000 baht per square meter, would face slow sales, he added.

“In 2009, purchasers will wait for construction to freeze to take their money back at the same time as developers will wait for purchaser’s uncertainty in paying to take away their down payments. Although ultimately, the developer will go broke first.”

Impact of Global Afflictions Partial till Now

Among the two storms now hitting Thailand's property market, local political turbulence has had a far bigger impact than the global financial crisis as most of the consumers are Thais who are influenced more by events within their own country, as per Apisit Limlomwongse, managing director of Nexus Property Consultants.

People here are not actually feeling the effect of the global financial crisis yet as the market is already observed as being at a low point and there is not much space left for it to go down.

In Mr Apisit's outlook, the property market is not likely to turn down much more even if political inconsistency drags on for one more year as people are becoming familiarized to it. "It has become part of life, they do this and that and we carry on with our dealing. This also means the impact of global economic instability is not that major as we are already down."

Some people purchasing real estate in fact require a home however others distinguish a benefit in investing now as they look forward to price hike when the political fight alleviates.

Temporarily, developers too appear to be more watchful with Nexus examining that there have been smaller number of fresh project launches recently. "This could be because of several factors. For example, things are always somewhat quiet during the rainy season and add in the politics and the universal financial system - clearly all symptoms are saying don't rush, don't be belligerent."

Mr Apisit noted most outsiders who purchase real estate in Thailand are familiar with the country. As outsiders also have a propensity to purchase the top-tier condominiums in Thailand, having units costing more than 120,000 baht a square meter, it is this segment that will be mostly hit by the global meltdown.

It is the section at 80,000 baht per sq m and lower that looks protected from the political and financial storms.

A recent research by Nexus reveals that 70% of the market stock is in the bracket at 80,000 baht and less. Of the leftovers, 25% is in the 80,000 to 120,000 baht segment and very little is priced more than 120,000 baht per square meter.