Is there an over-supply of property in Bangkok?

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On December 2, 2015, Posted by , In Real Estate News,Tips and Guides, With No Comments

Oversupply in BangkokIs there an over-supply of property in Bangkok?  No, and no doubt about it says President of the Agency for Real Estate Affairs (AREA), Dr. Sopon Pornchai.

Homes for sale are plenty, but not near the territory of past troubles.  New housing output declined some, but astonishingly its total value grew by a lot. Condominiums near mass transit boast a 72% take-up rate and an average 5% return on investment.  According to AREA’s November 2015 report release, there is no over-supply problem.

 

Highlights of AREA’s report: 

As it relates to the housing market

  • AREA notes that there is a large number of units for sale in the market.  178,641 units for sale making up 3.7% of total housing stock.  However, in times of trouble during Thailand’s financial crisis (1997-1999) – that figure was 5%.
  • Although slowly, AREA expects those units to be sold within 16 months based on current absorption rates and the mechanisms of Thailand’s market.
  • New housing units expected to be launched this year (estimated 107,821) is down 6% from 2014 and yet valued 21% higher (418.006 billion baht).  AREA notes that this is an extraordinary phenomena where output is lower but value is greater.
  • Homes priced between 1-5 million baht (in lower demand) declined by 16%.  But homes priced below 1 million baht (in higher demand) rose by 25%
  • Units priced over 20 million baht experienced aggressive campaigns increasing volume by four times and value by five – a reflection of resilient demand in the high-end market.

As it relates to the condominium market

  • AREA found in October 2015, that 114,959 condominium units built along the mass transit line were 72% occupied, meaning not vacant.
  • Of the total, 80% (65,590) were occupied by its owners. Only 16,766 units were occupied by renters. AREA asserts that condos meet the expectations of end-users and therefore no over-supply exists.
  • Return on condominium capital investment averaged 5.1%.  Return on sublet condos averaged 5.8%.  Return rates indicative of a healthy market

A fact not part of the report, is that during the United States housing bubble in the mid-2000’s, the real-estate market was considered to be a seller’s market. Property was in high demand. Homes received multiple offers pushing their prices up and selling overpriced through easily acquired sub-prime loans.

AREA’s report concludes that because there is healthy demand, government assistance for home buyers isn’t needed.  Rather, AREA believes the government should focus on ‘Enabling’ through means of regulating related professionals such as developers, valuers and brokers.

For homes, condominiums and apartments along Bangkok’s mass rail transit lines  

 

 

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