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Capital faces oversupply of condo units

The Nation October 31, 2008 Falling demand leaves developers with a large inventory of unsold units Bangkok may find itself with a significant oversupply of city condominiums located around mass-transit systems if demand tumbles next year once the impact of the global economic crisis strikes Thailand's economy. This was the message from property experts yesterday at a seminar entitled "Outlook for City Condominiums around the Mass-Transit System", organised by the Real Estate Information Centre (REIC). An REIC survey has shown 175 condominium projects located within 2 kilometres of the Skytrain and the subway. These have 66,232 units worth more than Bt200 billion. About 69 per cent of these units have already been sold, leaving 31 per cent, or 20,761 units, as market inventory. REIC director-general Samma Kitsin said the supply of condominium units this year had been close to that for last year. However, demand has fallen significantly, leaving a larger number of unsold units in the market than at this time last year. "We must warn property developers to reduce the size of their residential projects, because demand is dropping," he said. Asia Plus Securities senior executive director Therdsak Thaveeteeratham said demand for residential projects typically fell significantly when home-buyers delayed their decisions to buy. Research by the securities firm showed that presales recorded by 31 property developers listed on the Stock Exchange of Thailand in the first half of the year fell 6.67 per cent year on year, from Bt30 billion per quarter to Bt28 billion. Twenty-nine of the firms recorded backlogs that are now successfully sold but awaiting transfer to customers. These are worth Bt92.3 billion. However, if Thailand's economy suffers a significant slump, these home-buyers may delay or even cancel these transfers, because their earnings may also fall significantly. "Although home-buyers may want to transfer the residences, they may be unable to do so if commercial banks are strict about providing mortgages. This may directly affect property developers, who may be faced with unsold stock," he said. Kitisak Champatippong, senior vice president of property agency Harrison, said demand for residential projects located close to mass transit, from both local and foreign buyers, had fallen by up to 50 per cent year on year so far this quarter. This is because home-buyers believe the global economic crisis will affect Thailand's economy next year, and they are concerned about their earnings. "In my view, some locations, such as Ratchadaphisek, will be in oversupply. But there will still be demand for other locations, such as Lat Phrao and Sukhumvit Road," he said. Small and medium-sized property firms will have a hard time next year and may be forced to suspend new projects, he said. At the same time, market leaders who have a bigger cash flow will continue to develop new residential projects but must resize them to meet customer demand. Sena Development director Kessara Thanyalakpark said developers would have to adjust not only the size of their projects, but also the prices. This will be necessary to speed up sales and dispose of inventories swollen by falling demand.

 

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