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BANGKOK: Political unrest and an over-supplied US$20 billion (RM65.6 billion) real estate market in Thailand are the latest challenges threatening developers who are cancelling new launches in the hopes of staving off a bubble.
New project launches are expected to drop as much as 30% this year, which should help ease concerns about oversupply, but other sectors of the market may suffer.
The number of new housing units hit a record high last year with a boom in condominiums, which accounted for 58% of the market. This year the market, which accounts for about 5.5% of Thailand’s GDP, is expected to contract by 2% to 5% after rising 4% last year. The decline has already hit developers and could impact banks as well.
“The unrest should put a brake on a possible bubble in the sector. What we will see from now will be more cancellations on transferring new houses,” said Naporn Sunthornchitcharoen, president at Land & Houses PCL.
Thailand’s property index has dropped 10% in the past three months compared to a 5% fall of the broader index. Thailand’s consumer confidence and housing demand indices dropped for a 10th consecutive month in January, a survey showed.
High household debt and a rising rejection rate due to stricter loan regulations have also deterred homebuyers, especially in Bangkok.
Home loans are already slowing, potentially weakening earnings of major banks like Siam Commercial Bank and Kasikornbank.
Growth of the 2.48 trillion baht (RM249.3 billion) home loan market has been cut to 8% to 9% this year from 9.5% last year, a banker said.
Thamrong Panyasakulwong, president of the Thai Condominium Association, voiced concerns that some developers may face cash-flow shortages if the crisis is prolonged.
Increasing inventory and softer demand have prompted analysts to take a cautious view on Sansiri Pcl given the company has the most unsold condominiums on the market. — Reuters
This article first appeared in The Edge Financial Daily, on February 27, 2014.
