Bleak year ahead for Bangkok condo market

Bangkok

BANGKOK'S condominium market, once a favourite of Chinese investors, faces a bleak year as the Covid-19 outbreak keeps buyers away.

Foreigners are set to account for as little as 10 per cent of purchases in this year, down from 20 per cent two years ago, consultancy Agency for Real Estate Affairs estimates. Chinese buyers used to provide the bulk of overseas interest, but are now hampered by the travel curbs and economic havoc sparked by Covid-19.

"The demand from foreigners may disappear in the first half following the outbreak," said Sopon Pornchokchai, the consultancy's president, adding that there are 100,000 vacant condominiums in and around Bangkok. "We will need to rely on local buyers, but that won't be easy."

The Bank of Thailand has loosened mortgage-lending rules to encourage domestic purchasers, but developers remain wary. For instance, Naporn Sunthornchitcharoen, the chief executive of major Thai developer Land & Houses, said last month that the firm is "afraid" of the condominium segment.

Even before the virus spread from China, foreign interest was flagging as the outlook for an economy reliant on trade and tourism deteriorated amid currency strength in 2019 and the US-China trade war.

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Land & Houses does not plan to open any new condominium projects this year. Another developer, Singha Estate, is "very cautious" about buying land for residential offerings because of concerns about an oversupply of property in certain locations, its head of investor relations Maysenee Ratnavijarn said.

The real estate sector slowdown is among the many challenges ahead for the Thai economy in 2020. GDP growth may slow to as little as 1.5 per cent this year, a six-year low, a government agency forecast last week.

The first half of this year will be slow because of virus-related travel restrictions, but the property sector will eventually recover quickly, said Aliwassa Pathnadabutr, managing director of CBRE Group in Thailand.

Thailand's 55-member Property Development Index has tumbled about 19 per cent in the past 12 months, worse than the 9 per cent slide in the overall Thai stock market. Developers are expected to bring about 6,000 new condominium units to the market in the first quarter of this year, down 40 per cent from a year earlier, said Phattarachai Taweewong, associate director of Colliers International Group's Thai unit. BLOOMBERG