The Thailand residential property sector, a market favoured by Chinese and Hong Kong buyers, faces a further slowdown because of the coronavirus pandemic, after a slow start to 2020.
The sector had already been on a downward trend since the end of last year because of slow economic growth, high household debt and unrealistic pricing, especially in downtown areas, Aliwassa Pathnadabutr, the managing director of CBRE Thailand, said. “Even before the Covid-19 pandemic, developers were launching fewer projects. The pandemic has put more pressure to both developers and buyers.”
Thailand’s economy, which was among the slowest in Southeast Asia last year, is expected to contract by 8 per cent this year, according to the Asian Development Bank. The country has also had to contend with street protests in recent weeks. By the second quarter this year, developers were already offering discounts of as much as 36 per cent, according to Bangkok Post. All these factors are expected to weigh on the sector.
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Sales of residential units are expected to decline by 40 per cent year on year in 2020, according to property consultancy Colliers Thailand, to between 25,000 and 30,000 homes. “The target in this sector remains the same – that excess supply needs to be further absorbed before proceeding with a large number of projects,” Phattarachai Taweewong, associate director of research at Colliers, said.
Fewer purchases by foreigners, who face coronavirus-related restrictions on travel and entry to Thailand, have led developers to roll out discounts, so as to release their inventory, and get some liquidity amid the market slowdown, he said.
For instance, revenue was down by 18 per cent in the year’s first half at Ananda Development, which is known for developments around Bangkok’s mass transit system. Thailand allows 49 per cent of residential developments to be sold to foreigners and, unlike other jurisdictions, they pay the same fees and surcharges as local buyers. At Ananda, foreigners typically make up 25 per cent to 30 per cent of total sales. Moreover, mainland Chinese and Hong Kong buyers are its two biggest foreign buyers.
The company, which has launched projects worth between US$700 million and US$1 billion a year previously, will not be launching any this year, Chanond Ruangkritya, its president and chief executive, said.
“The lockdown in the second quarter caused overall economic activity to slow down, and residential developers adapted their business plans to reflect the situation. In general, developers are postponing the launch of new projects and are focusing on selling ready-to-move-in projects,” he said.
The company has managed to sell property worth 1.4 billion baht (US$44.3 million) to foreign buyers so far this year. “For the full year, we’ll see a slight decrease but overall, the market is still healthy,” he said. “We also need to look at how foreigners can come back to buy property, and the Thai government is working on a plan to reopen airports.”