Fear of bubble confined to condos
The property market is not facing a bubble, since residential prices crawled up only 1 percentage point a year from 2008-11, though there is concern about the condominium market, according to Siam Commercial Bank's Economic Intelligence Centre.
Residential prices last year were up 4 per cent from 2008, for an average of 1 percentage point a year, after inflation in the costs for construction materials and land. That is still lower than the bubble in 1996, when prices zoomed 15 per cent from 1993, or an average 5 percentage points a year.
Demand for homes in this period is more stable than during the economic crisis in 1997, as shown by growth in mortgages. Home loans have increased 12 per cent a year, only half of the 25-per-cent growth rate from 1993-96.
Household income is also rising faster than residential prices, which means people’s ability to buy a home is better than before the crisis in 1997, when residential prices increased faster than personal income.
Although supply in the market saw average growth of 5 per cent from 2010-11, up from 3 per cent from 2008-09, supply compared with gross domestic product is maintained at 2 per cent, the same as 10 years ago. It is also lower than 10 per cent during the 1993-96 bubble.
The absorption rate in the residential market has averaged 40 per cent a year since 2004, which is enough for the supply in the market.
