Ready for a revival

propertyThe overall market, sluggish for two years, is likely to recover in 2008 thanks to planned megaprojects by KANANA KATHARANGSIPORN

Ready for a revival
The two-year slowdown in the property market is expected to end in the second half of 2008 as the political situation will likely become clearer after a new government is formed in early 2008.

The new government should restore confidence in all sectors. Besides boosting the country's economy, the construction of new mass-transit routes should be accelerated as they would lift the overall economy.

New mass-transit lines and extensions will also open up new development opportunities. Homebuyers, especially younger ones, have expressed overwhelming interest in buying places near mass transit lines as it can reduce travelling expenses.
Of the two extension lines under construction, Onnuj to Soi Baring is expected to be completed by the first quarter of 2009, and Taksin to Bang Wa is scheduled to open in 2010. Most projects launched along these routes closed sales a few days after the launch.

At the same time, new routes announced by the interim government in mid-2007 attracted both developers and homebuyers, even though bidding was delayed until after the new government is formed.

These routes include the Blue Line, running between Bang Yai and Bang Sue, and the Purple Line, from Bang Sue to Tha Phra and Hualamphong to Bang Khae. The Purple Line is the most popular, with condominium developers launching many new projects along the route.

While external economic conditions pose a major worry for developers, the higher costs of development due to the rise in oil prices are the most challenging domestic factor facing the industry in 2008.

Construction costs started rising along with oil prices in early 2007. In the third quarter, the housing and land price index rose even higher. Land prices jumped 4.7% in the third quarter compared to the same period in 2006, while single houses increased 2.6% and townhouses rose 3.1%.

The country's economic outlook in 2008 looks grim as local and foreign investors lost confidence in the interim government, hurting foreign direct investment for the whole year of 2007.

The shocking policies included the Bank of Thailand's capital controls and proposed amendments to the Foreign Business Act (FBA) issued in late 2006 by the Surayud Chulanont government.

The FBA issue in particular prompted foreigners to stop buying real estate. Demand in the office and retail sectors fell sharply as existing international companies and retailers appeared reluctant to expand their businesses, according to property consultant Jones Lang LaSalle Thailand (JLL).

Many firms are waiting to see to what extent the new act will affect foreign business operations in Thailand. At the same time, not many new multinational companies are setting up shop in Thailand.

Corporations also decided to defer expansion plans as the near-term economic outlook is less than exciting. All of these factors resulted in a low take-up rate during the first half of 2007, JLL reported.

The weak confidence was also reflected by a drop-off in the number of land allocation permits and property transactions. In the first nine months of 2007, the number of land allocation permits in Greater Bangkok totalled 226 projects with 34,490 units, down 14% from the same period in 2006.

According to the Real Estate Information Centre (REIC), land and property transactions nationwide during the first eight months dropped slightly from the same period in 2006. The number of transactions hit 558,349, down 2% from 2006, while the total value was 6.87 billion baht, a 4% decline.

Meanwhile, the total number of housing construction permits nationwide during the first half of 2007 declined by 20% from the same period of 2006 in terms of construction area. In Greater Bangkok, the decrease was 32%.

The number of low-rise housing construction permits in Greater Bangkok fell by 2% in terms of unit numbers and 16% in terms of construction area. The number of high-rise buildings increased by 3% but the total construction area declined by 47%. These figures signalled a development trend in smaller-sized residential units.
In addition, the number of low- and medium-income residential units nationwide approved by the Board of Investment (BoI) in the first nine months of 2007 fell 75% to 10,534 units from 42,635 units in the same period in 2006. The large drop was caused by a decrease in Baan Ua-arthorn low-cost housing units.

The value of new housing loans for developers nationwide during the first nine months of 2007 dropped by 1% to 22.3 billion baht as many developers raised funds from property bonds, as seen by the 50% jump from 2006.

Housing loans for individuals in the first nine months of 2007 slightly rose by 4% year-on-year to 195.74 billion baht. Major factors included the downward trend in interest rates during the year and high competition among commercial banks. As a result, outstanding housing loans for individuals totalled 1.43 trillion baht, up from 1.35 trillion baht at the end of 2006.

During the first seven months of the year, the number of newly completed and registered housing units in the Greater Bangkok area totalled 38,417 units, down 7% from the same period in 2006.

Of the total number, 7,981 were high-rise units, up by 7% from the same period in 2006. Low-rise units fell 10% to 30,436. Of those, 22,154 units were single houses, 778 were duplex houses and 7,504 were townhouses and shophouses. Among the total number of single houses, 8,599 units were built by developers, down 13% from the first seven months in 2006.

REIC predicted the total number of newly completed and registered condominium units in Greater Bangkok would hit at least 18,000 units in 2007 and more than 20,000 units in 2008 due to the high number of completed units arising from the jump in high-rise housing construction permits during 2004-2006.

According to a survey by Agency for Real Estate Affairs (AREA), 24,227 condominium units were launched in the first eight months of the year, representing 60% of all residential units launched in 2007.

Most of newly launched condo units were in the middle-priced segment with prices less than three million baht. Some developers started building condominiums priced below one million baht a unit, reflecting the lower purchasing power of many consumers.

Sale of high-rise units this year remained strong, while those of low-rise units were not so good. The take-up rate for new condominium units resulted from the higher cost of transport, some speculation and investments for capital gains and rental returns.
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n 2007, AREA estimated that 67,630 units worth a combined 145.53 billion baht, or an average unit price of 2.152 million baht, came onto the market. Meanwhile, the number of newly registered houses would total 47,000 units by the end of 2007