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Political Deadlock Hindering Market Opportunities

By on Apr 26, 2010 in Property News

Written by Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis Thailand and Published on The Nation dated 19 April 2010.

Thailand’s political crisis has dominated news headlines for the past month and it is undeniably a pressing issue that businesses cannot ignore. The prolonged protests and crisis have had effects far beyond the tourism and hotel industries, with impacts on other sectors of the property market from residential, offices, retail to industrial.

Thailand’s latest political setback raises concerns over the country’s stability, particularly in the view of foreign investors. In the past 30 years of Thailand’s political history, the country has undergone nearly 10 military coups, none of which has created a division as widespread as today. Previously, political considerations had little impact on business and investment decisions, but today this has become a major consideration for both local and foreign investors.

In the current climate, investors’ confidence is a key issue that will undermine the recovery of the local property market. Since the end of last year, there have been clearer signs of the global economic recovery and Thailand’s residential market has been on the right track for recovery, with demand mainly driven by local buyers. The tax incentives that have been in place for the past two years have also been a big stimulus.

A new development cycle just started at the beginning of this year. The existing supply of condominiums in Bangkok is being absorbed and a new breed of project launches has begun marking the beginning of the boom cycle. Many publicly listed developers have launched schemes that have been successful, many selling out within a day or two. Foreign buyers are also returning to the market as their domestic property markets recover. Thailand is an attractive choice as properties remain undervalued with room for further price growth, offering a very good buying opportunity for investors as well as for the market to realise its full potential in terms of sales volume and capital appreciation.

However, the onset of the new round of protests has affected market sentiment. We have already seen a number of project launches and marketing events being postponed in the past two weeks with the ongoing protests, and sales activities slowing down. Property price increments have been suppressed by the ongoing crisis and foreign buyers are slowing down and holding off purchase decisions.

Looking back to the peak of the global economic crisis, when most economies were greatly affected, Thailand has in fact been less impacted by this crisis as the market has developed stronger market fundamentals in the property, banking, industrial and tourism sectors, learning grom the mistakes made in the previous Asian crisis. The country’s economy is much better positioned to move forward, were it not for the current political deadlock. One can only hope that the crisis will end amicably and stability will return, allowing the country to seize growth opportunities. If not, the crisis will set the country back years behind other markets.

Aliwassa has been the Managing Director οf CBRE Thailand for a number of years. As a Thai national, Aliwassa is extremely knowledgeable about the sale of property in Thailand, specifically large scale high value condominium developments largely in Bangkok.

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