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February 2015
The Future of Condo Ownership Around Thailand Real estate Companies and other property commentators have a variety of opinions about the Thailand condo market future. Here are some of the most recent comments and analysis. The Matichon Newspaper has described a recent survey of condominium buyers and found that 50 to 60% of them prefer condos outside Bangkok, adding that Pattaya is seeing major profit speculation. Project developers in northeastern Thailand, especially in Udon Thani and Khon Kaen, have decided against continuing projects in these Provinces. It has been reported that these developers have decided to stop their projects because of unsatisfactory sales and the oversupply of condos in these provinces. There are more profit speculators who buy a condo for future sale than those who buy it for long term ownership.
Each condo project should allow 15 or 20% of profit speculators, but at the moment this figure is about 50 or 60%.
Colliers (Thailand) Co. Ltd., a well-known international property consultant, has commented that there have been too many condo projects in Udon Thani, Chiang Mai, Pattaya, Cha-Am and Hua Hin in recent years. Oversupply was inevitable with slow sales. In some provinces, 25% are planning to buy condos for re-sale profit speculators. This may result in an economic bubble crisis which project owners need to recognise because the demand for condos to live is not as high as in Bangkok. Additionally a house can be bought easily and cheaply outside Bangkok. According to Colliers, at the end of the second trimester of 2014, Pattaya had 62,000 condo units, 73% or 45,000 of which had been sold. This year, more 25,000 condo
units will be completed and 25% of them will be bought for profit speculation.
In Hua Hin and Cha-Am 14,200 units out of 19,200 were already sold. In 2015 eight to nine thousand more condo units will be available with 10 to 15% of them bought by profit speculators. Frank Knight (Thailand) Co. Ltd. through a Board Member and consultant on real estate investment, Mr. Phanom Kanjanthiemthao, described concerns about the condo market outside Bangkok, namely in Pattaya, ChaAm and Hua Hin. In terms of Cha-Am and Hua Hin, Mr. Phanom said he was concerned about oversupply. Lower cost units likely to attract more speculators is the range of 15 to 50%. In Pattaya, Chinese and Russians are the major buyers. With Russia facing an economic crisis and a weaker currency, there is likely to many who default on their purchase contracts. Rattanakorn Asset Co. Ltd., have stated that Pattaya has up to 70,000 condo units available, with 30,000 unsold. This year up to 5,000 more new condo units will be available. It is expected that there will be up to 60% who are profit speculators. In these circumstances, it is possible that at least 40% of the condos remain unsold with prospective customers being unable to complete the purchases. In 2014, some local condo project owners reportedly stopped selling their condos and returned money to their customers.
The Phuket Real Estate Association secretarygeneral, Mr. Phatthanan Phisutwimol said that at the end of the second trimester of 2014, 6,000 condo units out of 19,000 were unsold. It is likely to take a couple of years to sell them. This year 2,000 new condo units will be completed, 60% of the sales will be completed while 40% will probably need to be re-sold because of financial credit problems and cancelled contracts. Down payments as low as 30,000 to 50,000 Baht have been allowed and with new condo units mushrooming some of them will then belong to profit speculators who are hoping for a later increased resale price. Century 21 Co. Ltd. (Thailand) Board Manager, Mr. Suphachai Chaemmanowong
said that the condo market in Cha-Am and Hua Hin will face small problems as 20 to 50% of buy condos for profit speculation. However, this is not very serious because Thai financial institutions are now very strict in granting credit.
In terms of other provinces like Udon Thani or Khon Kaen, most of condo buyers are Thai, with 50 to 70% buying to stay and 30 to 50% buying for profit speculation or longterm investment. “Condos that offer low down payment outside Bangkok will face problems when the buyers do not proceed with their ownership due to economic sluggishness. Outside Bangkok, the price of a house is equal to a condo. This affects the decision of buyers directly,� said Mr. Suphachai. The Real Estate Information Center of the Government Housing Bank, Director Mr. Samma Kheetasin described a new local strategy with condo projects of no more than 80 units located near important places such as universities. Of these, 70 to 75% of them can be sold rapidly. However many big condo companies invest in multiple projects, the first of which will be sold quickly but the rest having problems attracting buyers. The Real Estate Business Association of Chiang Mai and Lampang Chairman, Mr. Non Hiranyachet said that up to 4,000 condo units would be completed this year. 15% will be profit speculators and may not finish the down payments. However, since Thai financial institutions are restricting loans, there will be no serious problems.
A Real Estate Association of Songkhla source mentioned that, from 2011 to 2013, 70% or 5,000 of 7,000 units of 40 condo projects were already sold. From 2012 to 2013, there were less than 5% of profit speculators and few people preferred buying resold condos. This situation is different from Phuket, Chiang Mai and Pattaya. Many people who bought condos in Songkhla send their children to study in the province. They do not buy houses as a condo unit costs much less than a house. The overall picture is one of concern about the high level of property speculation, with buyers expecting a profitable resale which may be unlikely in an oversupplied market place.
PROPERTY TODAY, February 2015