By SOMLUCK SRIMALEE
Their move responds to an oversupply in the condominium market as purchase demand signed a drop in both local and foreign investors after a new measure to restrict approval of mortgage loans takes effect on April 1 this year.
That the baht remains strong over than USD and Yuan is also directly affecting investors from Mainland China, with a drop already showing this year compared to last year, say property experts.
“We revised our business model to focus on single detached houses and townhouses when we saw strong demand in this market segment,” LPN Development Plc’s chief executive and managing director, Opas Sripayak, said in a recent interview with The Nation. “The demand to buy condominiums both local and foreign investors, especially from the China mainland, was signed to drop in the second half of last year till now.”
Opas added that domestic investment demand had also signed to drop since the Bank of Thailand announced its latest measure to increase loan values for people who buy second and third homes to 80 per cent and 70 per cent. This will directly impact demand by investors and speculators, who cover about 20 per cent of total condominium market value.
Also adding to the demand drop is the latest measure from China’s government to restrict capital outflow from the country. It aims to reduce the investment from its citizens to other countries to not over US$50,000, or about Bt1.5 million, as China’s economy faces negative impacts from the trade war with the US that has continued into this year.
This impacts directly on the condominium market, which recorded demand above 20 per cent from Chinese investors from 2017 till now, he said.
“We have Chinese investors who bought about 300 units in our condominium projects from 2017 till 2018, with half of the units already transferred and the remaining 150 units to transfer this year,” said Opas.
“We have wait and see if they will transfer or not, when the baht is now stronger than USD and Yuan currency. This may be impact on their decision to complete the transfer, when Chinese investors are now reducing their investments overseas following China’s economic slowdown,” he said.
Prasert Taedullayasatit, honorary chairman of Thai Condominium Association, said the 2018 property market recorded a total sales value worth Bt512.17 billion, up 18 per cent from the year 2017, for all 121,193 units combined. That Bt512.17 billion included Bt293.72 billion from condominium projects, up 19 per cent from 2017 and spread over 70,066 units. Next was Bt122.58 billion from single detached houses, up 22 per cent from 2017, was spread over 18,601 units. The remaining Bt87.57 billion from townhouses, up 13 per cent from 2017, for a combined 30,914 units.
“Most of condominium projects sold last year included sales of up to 20 per cent sale to Chinese investors, which includes both the individual investors, and the brokers and agencies who bought more condominium units than they could sell to individual investors on the China mainland,” he said.
Following strong demand for condominium projects in the past year, which set national records for both sales value and the number of units, market demand this year may slow due to the measures by the Bank of Thailand and from measures by the China government to control capital outflow due to a minor domestic growth slowdown due to the trade war.
Meanwhile, low-rise residential – townhouses and single detached house – is where the real demand is within the domestic market, leading most property firms to revise their business model to focus on it, says Prasert, who also chief executive officer for the premium market at Pruksa Real Estate Plc.
Following the market trend, Pruksa Real Estate also had to revise its business model to find a new market to drive its business growth this year, he said.
“For our premium market, we had to select the location and also design the products to match specific demand in the market. This year will be a hard period for property developers, but we continue to have confidence the market will maintain to nearly last year’s [level],” Prasert said.
According to a survey by Lumpini Wisdom Co Ltd, a research firm under LPN Development Plc, the number of condominiums ready for sales to Chinese investors in 2018 totalled 5,000 units in Bangkok and suburbs. They were worth about Bt25 billion. All are to be transferred to their customers in 2019 through 2020.
According to a survey by Collier International, Bangkok and suburbs had a condo inventory of 30,993 units worth a combined Bt274.73 billion as of 2018 year end.
Land and Houses Plc’s chairman of the board of directors, Naporn Sunthornchitcharoen, said at a recent press conference that the company revised its business model to focus on low-rise residential projects this year, when they saw the demand for condominiums was going to drop.
This year, the company plans to start a further 16 projects with a total value of Bt26.96 billion, with 14 projects in and around Bangkok and two elsewhere in the country. All projects are either single detached houses, twin-houses, or townhouses.
Of the total sales for this year, 72 per cent are expected to come from single detached houses and twin-houses, 8 per cent from townhouses, and 20 per cent from condominiums, he said.
With regards to the Bank of Thailand’s (BOT) new measures to tighten credit underwriting standards for mortgages, Land and Houses has adopted a wait and see approach, Naporn added.