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Low-rise Projects Expected to Drive Market Growth of 5-10%

By on Jan 28, 2016 in Property News, Residential

Despite the weak economy, Thailand’s property market is expected to pick up this year, driven by the growing low-rise segment.

But economists and property experts warn developers should be more cautious and prepare for a changing landscape.

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Atip Bijanonda, president of the Housing Business Association, said the property market this year would grow by 5-10%, boosted by the single-house and townhouse segments.

“In many provinces, condos will remain sluggish this year, while demand for single houses and townhouses will continue to grow as supply remains limited,” he said.

According to the Real Estate Information Center (REIC), the number of low-rise units (single houses, townhouses, duplex houses and shophouses) remaining for sale in 26 provinces totalled 146,870 worth 541 billion baht. Also available were 98,130 condo units worth 275 billion baht.

Bangkok, Chon Buri and Nonthaburi had the most condo and low-rise units remaining for sale.

Prasert Taedullayasatit, president of the Thai Condominium Association, said sales of single houses and townhouses had picked up since the third quarter last year. Demand was strong for townhouses priced 2-3 million baht as large developers shifted to the segment.

Another good market was townhouses priced higher than 10 million baht located close to mass transit stations. The segment was able to compete with condos in the same location due to lower prices.

“Developers should prepare for changes in the real estate landscape,” Mr Prasert said. “As happened last year, big developers are expected to continue dominating the residential market, putting smaller developers in trouble.”

Big developers who will be more active in the residential market this year include TCC Group through Golden Land Property Development and CP Group through Magnolia Quality Development Corporation.

Don Nakornthab, senior director of the financial institutions strategy department at the Bank of Thailand, said the government’s spending on infrastructure this year may be minimal but it could lead private investment and help the property sector as most megaprojects will develop mass transit and transport networks.

“Developers should be more cautious in property development as the economy remains slow, with high household debt and low prices of agricultural products having an impact on consumers’ purchasing power,” he said.

Chartchai Payuhanaveechai, president of the Government Savings Bank, said the overall economy and growth would improve from last year as the government’s economic stimulus policies and other measures introduced by the central bank and the Public-Private Partnership Committee are implemented.

“Property developers should keep an eye on the market trend, diversify to single-house and townhouse development, especially in provinces, focus on the middle-to lower-end segment, continue improving products to differentiate and consolidate brands to save marketing costs,” he said.

New condos being launched should be low-rise projects of no more than eight storeys because they can have units sold, built and transferred faster than high-rise projects.

To catch up with new demand driven by property tax incentives that will end on April 28, developers should focus on prudent housing stock management, Mr Chartchai said.

The property tax incentives should help drain housing stock in Greater Bangkok. Last year stock rose only 2.7% to 171,905 units against rises of 16.2% in 2014 and 11.8% in 2013.

In 17 major provinces, the property market significantly slowed down, with the number of housing units launched dropping by 29.3% in the first three quarters last year to 31,193.

The number of units sold also fell by 35% to 35,148 in the same period. Units remaining for sale dropped by 3.6% to 107,180.

The REIC reported the number of housing units launched in Greater Bangkok last year dropped to 104,900 from 118,300 in 2014 due to unfavourable market sentiment and the economic slowdown.

Condos had the biggest decline from 73,100 to 60,400 units, while single houses and townhouses fell to 44,500 from 45,200.

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