New Housing Starts Drastically Fall In Thailand

[george]

New housing starts drastically fall in Thailand

BANGKOK: -- Cranes dot Bangkok’s skyline, crowns of a four-year property boom that analysts say has slowed dramatically this year, with a 24 per cent drop in new home starts.

But few here worry about a repeat of the devastating bubble that popped with the 1997 financial crisis — when the property market went into a tailspin — with experts saying the drop shows the market is correcting itself.

Sopon Pornchokchai, managing director for the private Agency for Real Estate Affairs, projects that new housing starts will fall by nearly one quarter this year, to 51,756 units from 68,052 units last year.

The value of those homes is expected to drop even more steeply, by about 40 per cent to 156.5 billion baht ($3.8bn), from 254.4 billion baht ($6.2bn) last year.

But he says Thailand doesn’t need to worry about another bubble. “This is not a bubble, this is just an adjustment in the market,” Sopon said.

“Last year, there were so many luxury units, with high-priced condo units, high-price penthouses. People realized the high price condos were speculative goods,” he said.

Developers this year have focused on more affordable, middle-class housing, Sopon said, but demand has slowed as rising oil prices have taken a bite out of Thais’ incomes and driven up construction costs.

And unlike in the 1990s, Thai banks have become much more cautious lenders, making it unlikely that Thailand will see the bubbles that many fear are emerging in other markets around the world, said James Pitchon, executive director at CB Richard Ellis (Thailand).

“The main reason is that banks have put the brakes on pretty early on,” he said. “There are few lenders, and banks are more cautious.”

Rising construction costs — especially rising fuel costs as Thailand has phased out its diesel subsidies — and increasing interest rates have made it more expensive to buy a home, he said.

Thai banks remember the painful lessons of 1997 and have become more careful in handing out loans.

“I’m quite optimistic in the long term,” Pitchon said.

Arthur Napolitano, managing director of the upscale developer Kudu, said the market remains healthy, but that buyers are becoming choosier.

“We see people taking more time to make their decisions, because at the same time they’re looking to get product below the advertised price,” he said.

Some developers have begun offering discounts or other promotions, like giving away furniture, he said.

“I think it is quite healthy. The market can’t go up forever.”

Underpinning sales of upper-end homes in Bangkok and in beach resort areas like Pattaya, Phuket or Samui are foreign buyers, Napolitano said.

Some are expatriates who have lived in Thailand for years already, others are looking for an investment, and many are semi-retired people looking for a second home, he said.

Pitchon said more and more Europeans are finding Thailand an attractive place to spend a few months of the year as Bangkok and the main beach resort areas offer more and more creature comforts, like access to international media and world-class retail and grocery stores.

“All of Europe is becoming far more expensive, both in terms of property costs and the cost of living,” he said.

But foreigners, who are legally barred from owning land in Thailand, face significant bureaucratic hurdles to buying property, and that has limited what could be a significant demand, Napolitano said. “If the obstacle were removed, then the market in Bangkok, Phuket and Pattaya would be very buoyant,” he said.

--AFP 2005-10-18

[cclub75]

“All of Europe is becoming far more expensive, both in terms of property costs and the cost of living,” he said.

<{POST_SNAPBACK}>

yes right, there is a bubble in Europe... But not in Thailand of course !

But I agree on his last point about the obstacles for foreigners to invest... If it happens, market would increase...

But of course, it won't happen, cha mai ?

[midas]

" yes right, there is a bubble in Europe... But not in Thailand of course ! "

Could that a slightly cynical remark cclub75 ??!! But they must be right

- after all this is the place where they created the Thai Elite Card !

[astral]

If new housing is falling, then the government should look into the

standards of construction.

[midas]

" And unlike in the 1990s, Thai banks have become much more cautious lenders, making it unlikely that Thailand will see the bubbles that many fear are emerging in other markets around the world, said James Pitchon, executive director at CB Richard Ellis (Thailand).

“The main reason is that banks have put the brakes on pretty early on,” he said. “There are few lenders, and banks are more cautious.”

But surely if there are so few loans then the marekt will surely come to a halt ?

A lot of the speculative high cost stuff has already been built - so isnt there a bubble already ?

[charles]

A lot of the speculative high cost stuff has already been built - so isnt there a bubble already ?

<{POST_SNAPBACK}>

I'd say being built. For example on Sukhumvit, don't think more than 3 or 4 of such places have actually been completed and transferred. Many won't be ready until late next year at the earliest.

[freeinfo]

and one should see the sheer quantity of 5-20 Mil. Baht and up houses in gated communities not exactly for the middle class, being built around Bkk burbs!

Projects along Sukhumvit pale in comparison!