15 Jan Real estate tracks resurgent economy
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The overall Bangkok property market in 2017 was very interesting, especially in terms of new condominiums launched, with the total of 56,000 units the highest in several years. As well, joint ventures between Thai and foreign developers, particularly Japanese, are shaking up the market, as is the growing number of large mixed-use projects being announced.
Many mixed-use projects are worth watching closely, as they could bring about major changes in the communities surrounding them. Many people are also concerned about the environmental impact of such large-scale projects once they are completed.
The many factors that directly affected the property market will not change much in 2018, although some positive trends are expected to have a positive impact. Economic conditions in 2018 are expected to be better than in the past few years, as key drivers including exports and tourism are showing continuing improvement from 2017. In addition, investment from both the government and private sector is on the uptrend.
While government and private-sector economists are bullish on the prospects for GDP growth of around 4%, consumer confidence and spending may not be as strong as they could be. The chief constraints are high household debt and confidence about the long-term political situation as the country heads towards an election expected late this year.
In any case, activity in the Bangkok condominium market in 2018 should continue to increase from the second half of 2017. Many developers, especially listed companies, still have expansion plans. Total new condominium launches should be similar to last year’s level of 56,000 units, depending on purchasing power and the transfer rate. Bank lending policies will be the key to transfers of many projects scheduled for completion in 2018. If buyers cancel bookings because they cannot secure mortgages, this will directly affect developers and overall market.
Nevertheless, the overall trend in the condominium market remains the same, with most of the activity concentrated in areas near planned and under-construction mass-transit lines. All developers are looking for promising land plots for new condo projects, particularly those with unit prices between 3 million and 4 million baht each. In addition, some developers are planning to launch high-end and luxury projects in inner Bangkok because they need to diversify their revenue streams.
While developers are also looking at more single detached housing projects, activity in this segment could decrease in the future because of the steady rise in land prices. Meanwhile, developers will carefully monitor the condominium market because they don’t want to rely on too high a level of investors or speculators as in some periods in the past.
The average take-up rate for new condominium units launched in 2018 is expected to be 65-70% — or 7-8 points higher than in 2017, when a lot of new projects came on the market — but much still depends on economic conditions and buyer confidence.
Among the other property sectors expected to show growth, the most interesting is office buildings, for which demand has strengthened in the past one or two years. Demand will continue to rise in 2018, but with some 750,000 square metres of space expected to come on the market between now and 2021, demand and take-up could start to ebb if the economy does not perform as expected or politics takes an unexpected turn.
The retail property market may be facing a tough year compared with other sectors, as many tenants have been affected directly by weak consumer spending amid concerns about the economy and politics in recent years. In addition, online shopping is affecting the fortunes of brick-and-mortar retailers, but to a much lesser extent than we are seeing in some other countries.
The number of new retail projects is on a declining trend, particularly community malls, many of which are not as popular or successful as in their heyday a decade ago.
More joint ventures between Thai and foreign companies are in the pipeline, and some significant deals may be announced in 2018, with a rising proportion of Chinese companies involved. The residential market will be the main market for all developers, but they are also looking for opportunities in other sectors, especially those that can generate recurring income.
Source: Bangkok Post