Continued Demand and New Normal in Thai Residential Market
Condominium developers are focusing on clearing out their unsold inventory while the housing market continues to attract end-user buyers. The Work-From-Home policy, transportation route expansions and health-conscious living will become major factors in shaping the New Normal in the Thai residential market as a result of the COVID-19 outbreak, according to CBRE, a leading international property consultant.
Ms. Aliwassa Pathnadabutr, Managing Director of CBRE Thailand, commented that since 2019, the condominium market has been affected by the Baht currency issue and the loan-to-value (LTV) measures. Later, there were signs of market recovery and better understanding of the new Land and Building Tax regulations, but the sudden arrival of the COVID-19 pandemic has dampened the market, especially during March and April 2020. Even without the outbreak, the condominium market will develop equilibrium where the supply gradually slows down. The good news is almost no new supply is coming in to compete with the existing ones. The developers have turned their focus on selling their unsold off-plan and completed projects. On the other hand, the single-detached housing market is less affected compared to the condominium market. The overall housing market has no speculative demand as most buyers are end-users who want to buy for their own living. After the Thai government has relaxed its lockdown measures in the second phase, we now see more buyers visiting sales galleries and the sales performance is almost at the same level as pre-COVID-19.
Ms. Artitaya Kasemlawan, Director of Advisory & Transaction Services - Residential Sales, CBRE Thailand, also gave an insight on each buyer segment in the residential market, revealing that the number of foreign buyers, especially the Chinese, has been declining even before COVID-19 due to the currency rate which is a result of the ongoing China-U.S. trade war. The travel restrictions from the virus outbreak also contributed to this decline. However, demand from this buyer segment remains and they will comprise a major feeder market once the international travel restrictions have been lifted. CBRE has witnessed an increase of Chinese buyers in the luxury condominium market compared to 4-5 years ago when Chinese buyers would buy units in the range of THB 3 – 10 million. The second buyer group consist of short-term speculators that have now disappeared from the scene, accounting for 20-25% of the total number of buyers prior to the outbreak. The third group are end-user buyers who still show continuous demand. This group of buyers now have greater time to consider projects and more developers are unveiling special offers. After the COVID-19 lockdown was lifted, the demand from this group has recovered very quickly to the pre-COVID-19 level. Long-term investors make up the fourth group whose focus is the price margin, ready to make a purchase if a unit is cheap. In this situation, end-users and investors are evidently still active in the market.
It is now a buyer’s market whether it be real estate or consumer goods. However, property is a product with a number of factors to consider including each area’s demand and supply, location, design and sales performance of individual projects that will differentiate promotions, especially discounts that are not offered at the same rate. Therefore, buyers will require a considerable amount of time to compare and the sales will gradually progress.
“The recovery of the residential market will be divided into two phases. The first is when business operations resume normally, as many have already begun, but with the international travel restrictions, this period will depend on demand from domestic buyers who are expected to take approximately 1-3 months in decision-making. The essential factor is the overall sentiment of the business sector. If there are stimulus measures to boost spending, the market will recover faster, perhaps in the latter part of the third quarter of 2020. The second phase of the recovery would take place once international travel reopens, beginning with business trips followed by leisure travels, which could be seen in the fourth quarter based on this year’s forecast. This will strictly depend on the government’s policies, availability of a vaccine and the ability to prevent a resurgence of the virus,” Ms. Aliwassa added.
In addition, Ms. Aliwassa also noted the two issues that will be seen as the New Normal for the residential market, “the first one is location which we should keep an eye on. Buyers will choose between the inner city and midtown/suburban areas. As people are spending more time at home and working from home, the need for space usage will increase. Coupled with the mass transportation expansion outside the metropolitan area, some buyers will reconsider their housing choices in terms of value related to usable space. The other New Normal that is expected to continue post COVID-19 is health and environmental care. Developers and designers will have to bear in mind changes in buyers’ behaviours and highlight specifications that advance health and convenience of life of residents when developing a future project such as usable area, air quality and new technologies. CBRE has already witnessed it from past crises where product development was improved in response to changes in demand of the time. Examples include more compact sizes of condominium units; more efficient unit layouts; fully-fitted or fully-furnished provision; and higher quality of specifications. It will be interesting to see how new products in the residential market will be developed in response to the changes in the buyer’s requirements after COVID-19.”