Condominium end-user buyers are smiling this year, as developers concentrate on clearing completed but unsold inventory in response to weaker demand, partly due to stricter Bank of Thailand mortgage requirements for buyers of second and third homes.
As a result, the residential market this year will be more driven by end-user demand, with fewer investors or speculators than in recent years.
Many developers have said they will focus more on low-rise residential launches with single detached houses and townhouses, rather than condominiums. The low-rise residential market is entirely driven by Thai end-users, not buy-to-rent investors, foreigners or speculators.
CBRE expects a significant increase in new low-rise housing projects, raising the level of competition in this segment.
The condominium market is going to be slower this year. Instead of planning many new launches, developers will concentrate on unloading built-but-unsold inventory, completing buildings, transferring titles to existing purchasers and selling remaining units under construction.
CBRE believes that the condominium market is going to be driven by people who buy units to live in themselves. There will be a lower level of speculative buying of off-plan units to resell before construction completion.
EXPAT DEMAND FLAT
Buy-to-rent investors will be more selective because the number of expatriates, which is the main source of demand for the central business district (CBD) rental market, is not increasing, nor are expats' rental budgets.
The reason that end-user purchasers should be cheerful is that many developers are going to offer meaningful incentives to purchase, including some significant discounts and aggressive promotional campaigns.
Purchasers will be able to see a range of completed projects in their preferred locations and compare completed products, rather than rely on brochures and show units. They can see exactly what they will get, making comparisons much easier.
The discounts will mainly be available only in buildings with unsold inventory, and CBRE does not expect a fall in prices across the whole market. In fact, the opposite is the case, with prices still rising in the most sought-after developments in prime CBD locations.
Overall, the market-cooling measures imposed by the central bank will be positive in the longer term, preventing the build-up of a bubble and allowing real demand to take over from speculative demand.
There will still be new off-plan launches at every level of the market, but developers will be more cautious and increasingly focus on domestic end-user purchasers in the entry- and mid-level segments. This means they will have to provide a product that people want in terms of size, design and specifications, in their preferred location at a price they can afford.
Patti Tomaitrichitr is head of research and consulting with CBRE Thailand. She can be reached at bangkok@cbre.co.th