The Bangkok condominium market is oversupplied. For the past years, the Thai property market has seen fewer buyers, particularly in the capital city of Bangkok. Cruising along the Sukhumvit area will show upscale condo markets selling at a greatly discounted price. Whilst most property developers will be slow to admit it, demand for property in Thailand has slowed and is affecting how they proceed with their business plans.
Bangkok’s oversupply of condo properties may be attributed to the country’s large consumer debt and locals are more cautious in making investments as they take reference from the 1997 crash. Still, Thailand remains to have a strong market with rising prices.
Developers Adjusting According to Demand
Property analysts believe this condo oversupply is temporary and developers can easily work around this slump. Many developers are now delaying new launches in areas where there is an oversupply. This situation will eventually even out as the market adjusts, particularly in marketing these properties. Some developers shifted their campaigns to improve the mid-year sales of their completed projects, offering generous discounts and waived payments to create movement in the market. Others are looking at clearing their existing stocks.
In a market survey conducted by REIC, during the first half of 2018, new residential supply decreased by 26.7% year-on-year to only 40,526, with values dropping by 20% to roughly 168.32 billion baht. The condo supply dropped by 17% in the first half of the year.
Chinese Property Investors Hoarding Condo Properties
Whilst many Thai locals are hesitant in investing their money on condos in Bangkok, the Chinese are grabbing the opportunity for low prices. According to the Bank of Thailand, Chinese property investors spent a total of $40 billion baht on Thai properties in 2018.
Aside from great weather and amazing gustatory experience, more Chinese investors are putting their money in Thailand over properties in Australia or Canada because of the low prices and taxes. Thailand does not impose additional foreign buyer taxes. Additionally, foreigners are permitted to own as much as 49% of the apartments in any condo project in Thailand.
However, this may not be enough to cover for the oversupply since the Chinese government aims to restrict the outflow of capital from the country effectively reducing its citizens’ foreign investment to less than 1.5 million baht. In addition, financial institutions in Thailand are putting in tighter reins on approval of mortgage loans for foreign investors. These factors leave Chinese investors no choice but to limit their investments in Thailand for the time being.
Shift to Low Rise Properties
As the high-rise property market stalls, developers are not backing down and has shifted their plans on developing low-rise properties such as townhomes and single detached homes.
Developers are looking at investing in low-rise residential homes since they are more in demand within the domestic market. This year, a big chunk of total property sales in Thailand will come from these low-rise properties with as much as 72% of sales are expected to come from single-detached homes and twin-houses, 8% from townhomes, and the remaining 20% coming from condominium properties.