Real estate prices in Thailand are unlikely to recover for some time as shrinking demand for property has led to oversupply with many developers forced to freeze projects. Like many other global property markets that have a high percentage of foreign property investors it is lack of finance and concern over unemployment that is creating a general lack of confidence in the markets. But in Thailand there are also concerns about political unrest.
As a result TRIS Rating, the Bangkok based credit rating agency, has described the country’s property sector as unstable and said it is likely to remain so for at least the rest of the year. The National Economic and Social Development Board (NESDB) has already forecast that the Thai economy will shrink by 2.5 to 3.5% this year.
TRIS said that banks have become more cautious in offering mortgage loans and despite government efforts to stimulate the economy there is no immediate end in sight for the downturn and sluggish demand for housing would continue for the foreseeable future.
Property developers would continue to face a weakness in the market, especially in the single house and townhouse sectors for the remainder of this year, TRIS added. New condominium start-ups have also declined and this would result in fewer start-ups this year compared with 2008.
The property industry expects developers of luxury housing, which is often bought by foreign property investors, to cut prices by 5 to 10% in the second half of this year.
The number of new condominiums launched in the first quarter of this year fell by 36% compared with the same period last year, according to property brockerage Century 21 Thailand. It said it was a result of the financial crisis and home-grown political instability.
Century 21 believes 2009 will be a tough year for the Bangkok’s downtown condominium market in particular. Critical factors, said the agency, would be completing projects on time, the quality promised, and the willingness and ability of customers to complete transfers. The company also predicts that developers will use bond offerings to help raise funds as banks and financial institutions tighten their credit lines.