Economic slowdown to limit growth
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Experts see mid-range segment as best performer in 2nd half as market slows sharply after good first period
Property experts believe the residential market will expand only slightly in the second half of the year, in line with the economic slowdown, and that this will result in full-year growth of up to 10 per cent – despite the sector witnessing growth of 18 per cent in the first six months.
Pruksa Real Estate president and CEO Thongma Vijitphoungpun estimates the property market in greater Bangkok will grow by 7-10 per cent in the current half, contributing to full-year growth of about 10 per cent to around Bt325 billion.
An estimated Bt196.4 billion worth will be contributed by condominiums, Bt77.9 billion by detached housing and Bt51.4 billion by townhouses, he said.
“Although the first half of the year saw market growth of 18 per cent after recording a total market value in Bangkok and its suburbs worth Bt172 billion, compared with Bt145 billion in the same period last year, the market will expand slowly in the second half, resulting in full-year growth of up to 10 per cent,” he explained.
Issara Boonyoung, adviser to the Business Housing Association and CEO of Kanda Group, said the market looked set to witness relatively slow growth in the second half, in line with the economic slowdown.
As a result, most property firms will have to launch special promotions to maintain or boost sales during the latter half, he said.
“In terms of total revenue recorded, that may not show the real state of the market because some property firms will enjoy transfer income for condominium projects launched two years ago and that are already to complete and transfer to customers in the second half of this year,” he added.
However, new presales for both condominiums and low-rise housing in the second half will be slower than in the first six months, as many home-buyers are concerned about their earnings during a period of slow economic growth, or even recession, said Issara.
The residential property market normally has a direct correlation to the country’s economy. If gross domestic product expands strongly, then the property market also tends to be strong, but if GDP contracts, the market generally also sees a drop, he said.
Meanwhile, the Real Estate Information Centre (REIC) of the Government Housing Bank estimates the number of newly registered homes in greater Bangkok will grow by only 7 per cent this year, at 125,000 registrations.
This is based on registrations during the first half, which grew 7 per cent year on year to 57,300 units.
Of the total, 33,200 new units were in Bangkok proper, and the remaining 24,100 in the neighbouring provinces of Nonthaburi, Pathum Thani, Samut Prakan, Samut Sakhon and Nakhon Pathom.
Condominiums continued to be popular, with 31,500 units or 55 per cent of newly registered homes, while detached houses accounted for 13,500 units or about 23 per cent, townhouses for 6,600 units or 12 per cent, and 9 per cent were shop-houses, said the REIC.
The most popular locations for new condominiums were Phra Khanong, Bang Kapi and Chatuchak districts in Bangkok, and Nonthaburi’s Pak Kret and Muang districts.
Lum Luk Ka district in Pathum Thani, Bang Phli district in Samut Prakan, Sai Mai and Min Buri districts in Bangkok, and Bang Bua Thong district in Nonthaburi province were popular locations for detached housing and townhouses, the survey said.
Middle market stronger
Despite the overall state of the residential sector, demand for homes costing in the region of around Bt3 million remains stronger than demand in other market segments.
LPN Development managing director Opas Sripayak said that although the country’s economy had slowed, demand for housing costing no more than Bt3 million was still growing because it represented real demand rather than speculative activity.
“Some potential customers may be faced with banks restricting the provision of mortgages, but we have tried to help them get a housing loan by negotiating with the commercial banks to use a customer’s down-payment record when considering their purchasing power and ability to repay,” he said.
LPN has a rejection rate of less than 10 per cent among its customers, as they know what they have to do when they buy a home and have sufficient savings to get a mortgage, he added.
Sansiri president Srettha Thavisin said that although people’s purchasing power to buy a home in the second half of this year would be less than in the first half, the impact on the company would be relatively slight because of its Bt62-billion backlog of units that will transfer to customers in the second half of the year through to 2017.
“We believe our presales and total revenue will achieve the targeted Bt48 billion and Bt34 billion-Bt35 billion, respectively, this year,” he said.
He added that demand for mid-market housing was growing, besides which Sansiri customers were generally able to secure a bank mortgage because most could provide earnings records at the application stage.
“We have a rejection rate of less than 10 per cent, which is lower than the market average,” he said.
Quality Houses chief executive officer Rutt Phanijphand said the company would focus on the middle market over the remainder of the year, as it had seen stronger demand in this segment than in other parts of the market.
Currently, 45 per cent of QH’s presales value is from the middle market, where prices range between Bt3 million and Bt5 million per unit.
The economy market, for homes costing no more than Bt3 million, accounts for 29 per cent of presales, while about 26 per cent is from the luxury market, he said.
“We believe the property market will continue to grow in the second half, but more slowly than in the first half, in line with the slower economy and the banks being more restrictive with mortgages,” he said.
However, although real demand will continue to expand, home-buyers may reduce their budgets, resulting in the market for housing costing up to Bt5 million growing faster than the high end of the market,” he added.
