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Impact on the Property Sectors from the Floods

By on Nov 02, 2011 in Property News

The current flooding situation will have an impact across the board on all property sectors, but will vary in degree and extent, according to a leading real estate consultant CBRE Thailand.

In the short-term, business is likely to slow down as people will be busy solving their own problems .

Overall, the flooding will result in changes in demand patterns in the residential sector in terms of preferred locations and product. In terms of location, the CBD which includes Lumpini, Silom, Sathorn and early Sukhumvit will be the preferred area, other areas will be assessed after the flooding is over. Demand for high rise condominiums is likely to rise as people may want to buy them  to use as a second home in the city center.

Purchasers considering buying residential properties in the future will pay more attention to the product, design features and flood protection measures of individual developments. Housing developers will also need to ensure flood prevention measures and features are incorporated when launching new developments.

The second home markets in Pattaya, Chonburi, Hua-Hin, Cha-am and nearby provinces will benefit from this crisis. Bangkok residents with disposable income will be inclined to purchase holiday homes out of Bangkok as many residents are now evacuating to Pattaya and Hua-Hin.

The move of Bangkok residents out of the city is also benefiting the hotel markets where CBRE is seeing a pick-up in occupancy for hotels and serviced apartments in Pattaya and Hua-Hin. Bangkok on the contrary is facing a drop in occupancy with cancellations from overseas tour groups and with travel warnings for Thailand. However, given the resilience of Thailand’s tourism industry, CBRE expects arrivals to quickly rebound once the flooding is over.

The office and retail sectors will experience minimal short-term impact. The office sector is experiencing a short-term slow down as businesses are delaying decisions, while the retail business is experiencing a slow down or closure in some areas which are directly affected by the flooding. In the long-term, retailers may re-think their distribution strategy and consider a wider geographical dispersion of their distribution centres in order to minimize the impact from any  future crisis. However, CBRE believes the retail sector will experience a quick recovery.

The most impacted is undoubtedly the industrial sector. At present, it is difficult to predict how long the recovery process will take, but in the short-term the impact is severe with widespread disruption in the manufacturing and distribution chain. The recovery process will be strongly underpinned by the government’s effectiveness in implementing supporting measures, as well as the individual industrial estate operators’ measures to bring factories back into operation. Going forward, whilst existing operations will re-open, it is critical for the government to re-build confidence and take effective measures to prevent similar disasters from occurring again in the future, if not, Thailand is at risk of losing its credibility and FDI.

Overall, the government’s recovery program will be essential to all sectors of the property market and will have a direct impact on the overall economic outlook and Thailand’s direction for the coming year.

 

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