Bangkok’s empty apartments and Hong Kong’ pain

  • Business
  • Saturday, 29 Feb 2020

BANGKOK’S condominium market, once a favourite of Chinese investors, faces a bleak year as the novel coronavirus outbreak keeps buyers away, Bangkok Post reports.

Foreigners are set to account for as little as 10% of purchases in 2020, down from 20% two years ago, consultancy Agency for Real Estate Affairs estimates.

Chinese buyers used to provide the bulk of overseas interest but are now hampered by the travel curbs and economic havoc sparked by the virus outbreak which is threatening to become a global pandemic.

“The demand from foreigners may disappear in the first half following the outbreak, ” says Sopon Pornchokchai, the consultancy’s president, adding that there are 100,000 vacant condominiums in and around Bangkok.

“We’ll need to rely on local buyers, but that won’t be easy.”

The Bank of Thailand has loosened mortgage-lending rules to encourage domestic purchasers but developers remain wary.

Naporn Sunthornchitcharoen, the chief executive of major developer Land & Houses Plc, last month said the firm is “afraid” of the condominium segment.

Even before the coronavirus spread from China, foreign interest was flagging as the outlook for an economy reliant on trade and tourism deteriorated amid currency strength in 2019 and the US-China trade war.

Land & Houses does not plan to open any new condominium projects this year.

Another developer, Singha Estate Plc, is “very cautious” about buying land for residential offerings because of concerns about an oversupply of property in certain locations, Head of Investor Relations Maysenee Ratnavijarn says.

The real estate sector slowdown is among the many challenges ahead for the economy in 2020. Gross domestic product growth may slow to as little as 1.5% this year, a six-year low, a government agency forecast last week.

Thailand’s 55-member Property Development Index has tumbled about 19% in the past 12 months, worse than the 9% slide in the overall Thai stock market.

Developers are expected to bring about 6,000 new condominium units to the market in Bangkok in the first quarter of 2020, down 40% from a year earlier, according to Phattarachai Taweewong, associate director of Colliers International Group’s Thai unit.

“It’s tough situation in 2020, ” Phattarachai says. “Hopefully the market can go back to balanced supply and demand again in the next three years.”

Hong Kong, which has among the highest property prices in the world, is not spared either but property consultancy Savills believes the situation is temporary.

“The outbreak is unlikely to prompt a sharp correction in luxury residential prices unless it continues beyond June, ”Savills says.

Prices of luxury residential units have continued to rise even if volumes have had to bear the brunt during trade war and street protests.“We believe that, as with the Severe Acute Respiratory Syndrome or SARS, most people know that this unfortunate event is more than likely to be temporary, ” the report says.

“Fundamentals including negative real interest rates and limited supply will continue to support values in the medium term.

“Volumes can be expected to remain low as primary market activity, which has driven transactions over the past 12 months, dwindles due to a lack of new launches, ” the report says.

The report says anything which restricts China’s access (businesses, tourists or investors) to Hong Kong will eventually have implications for property values.

Savills says: “A pandemic would obviously have terrible implications for an already fragile global economy still recovering from the 2008 financial crisis.”

It also says that the the importance of China for Hong Kong is evident across almost all sectors of the economy.

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