'No need to rein in property market'
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The property market shows no signs of overheating that would require the Bank of Thailand to launch control measures, according to Jones Lang LaSalle.
“A real-estate bubble can occur when there is excess demand from speculative buyers and abundant liquidity through borrowing, which drive property prices to levels well above their fundamental economic value,” managing director Suphin Mechuchep said yesterday.
“Bubble conditions can also be caused by developers undertaking projects without proper market studies and planning, leading to overbuilding. However, our close monitoring of Bangkok’s core and central condominium market shows that those conditions do not currently exist.”
As the stock market is on a bull run and the baht is on an upcycle, some economists in the public and private sectors have voiced concern over possible bubbles in real-estate markets. This probably assumes that many people who have made profits from the stock market may invest in the housing or condominium market.
Despite the strong growth of new supply, prices of condos in completed buildings and off-plan projects in Bangkok continue to rise. However, the price increases have been gradual and driven by sustained demand, improvements in product quality and offering, and rising costs.
While it is hard to identify the actual percentage of speculators in the condo market, the consensus is that some condo projects by leading developers attract a considerable number. These projects include those in the upper-mid-price segment in prime locations, which show high potential to appreciate in price when construction is complete or nearly so.
However, these projects are generally few and far between, as actual profits on changes in condo prices are unlikely to lure strong speculative demand. Overall, most buyers are end-users and/or investors looking for an income-generating asset as a long-term investment.
On the supply side, most of the new projects are in the mid-price segment – Bt75,000-Bt100,000 per square metre. They are satisfying growing demand from young, middle-aged and retiring buyers adopting a more urban lifestyle.
In the luxury segment, launches have slowed down over recent years, allowing the supply under construction to be absorbed.
Prices of new condos will continue to edge upward because of higher costs, including for land that is becoming harder to find. New projects also tend to offer higher quality in both design and construction, which will contribute to higher prices.
“While the central bank’s request to commercial banks to become more cautious about mortgage lending is a sound initiative, we don’t think any cooling measures to curb property transactions are necessary at this stage as there remains no clear sign of a real-estate bubble,” Suphin said.
“Any measures to curb property transactions could simply undermine real-estate demand, as the intervention could eventually result in added costs to buyers, for whom affordability is ultimately the key issue,” she added.
