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Thailand is Struggling to Draw Back Foreign Demand

By on Jun 27, 2012 in Property News

The Bangkok luxury property market has a lot going for it and has continued to be active in the past few months, particularly this year when benchmarked against regional competitors that have seen a downward trend, albeit from significantly higher prices.

In 2012, the Asian luxury residential market has weakened, coupled to worries over the European debt crisis. This has affected regional sentiment and luxury sales have been sluggish in key markets including first-tier cities in China. Cooling measures imposed last year on markets to prevent overheating have also dampened sales volume.

Luxury property prices have weakened in China, Hong Kong and Singapore. Singapore prices have reportedly dropped 2.3 per cent and Hong Kong 1.4 per cent from the previous quarter. As buyers’ confidence is weakening, they are adopting a wait-and-see attitude, forcing developers and property owners to lower asking prices and offer discounts to generate buying interest.

Bangkok and Kuala Lumpur-both significantly cheaper than Hong Kong, Singapore and China-are the only two cities in the region reporting price increases in the luxury segment. The story in Bangkok is in fact the opposite of what we are seeing in other markets. The luxury residential market here has been active and consistently gaining momentum. Record prices have been achieved for top quality properties in prime locations, particularly the Ratchadamri, Lumpini and early Sathorn areas. Based on recent transactions, achieved sales prices for luxury units are in the region of Bt160,000 to Bt200,000 per square metre-a level that is now becoming the new market norm.

It is positive news that Bangkok is bucking the regional trend and that most of the sales activity is currently driven by the local market, particularly end-users. Based on CBRE’s first-quarter sales performance, 87 per cent of purchasers were Thais and only 13 per cent were foreigners. Of the foreign buyers, most were end-users rather than investors.

Whilst the market continues to move forward on local demand and the change in lifestyles, a return of foreign investment would strengthen the market. A typical foreign investor considers multiple markets and invests when a market is improving or on a rising cycle. At present, the Bangkok luxury market is on a rising cycle, whilst most of Asia is on a downward spiral, giving Bangkok a competitive edge to attract investors at the quality end of the market. However, we are not yet seeing a return of foreign investment. To draw back this valuable economic element, Thailand will have to try harder in marketing, PR and politics, offering a clear message of welcome to inbound residential unit investors. Even though Thailand has weathered many political protests, the country’s political landscape still lacks stability and politics is overshadowing the country’s growth in all economic sectors, including property.

It should be remembered that across the world and its property markets, political uncertainty and weak democratically elected governments with relatively short-term policies are the norm and commercially run city states like Hong Kong and Singapore are the exceptions.

The good news is that as significant time has lapsed since Thailand’s problems began, investors are now beginning to see this as a permanent backdrop to an economy with growth and not a reason to totally avoid Thailand.

The country is striving to revive its image through the rebranding Thailand campaign, but all it really needs are a definite political direction and clear message of welcome and security to foreign investors to give them fresh confidence to come back.

Source : The Nation 25 June 2012 written by Aliwassa Pathnadabutr, Managing Director of CBRE Thailand

Nora has been in the Corporate Communications arena for a number of years. Nora's role is to communicate all newsworthy items that are of a PR nature.

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