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City condo glut looming

source: Bangkok Post Oct 22 2008 Data centre alert as supply floods market Developers should be more cautious in launching new condominium projects next year because there are fewer potential buyers and many units could be left unsold, said Samma Kitsin, director-general of the Real Estate Information Center (REIC). "New project launches should be delayed if developers' financial status is not strong enough because financial institutions will be more careful in releasing both project loans to developers and mortgage loans to homebuyers," he said. An REIC survey on outstanding condominium supply from October 2007 to September 2008 showed there were 134 projects with a total of around 43,000 units offered for sale, rising from 121 projects with 34,000 units surveyed in October 2006 to September 2007. Of the number, 60% were carried over from 2006 and 40% were newly launched in 2007. The survey covered locations within two kilometres from the current mass BTS and MRT mass-transit lines as well as new BTS extension lines in the Onnuj-Baring and Taksin-Bang Wah areas. REIC also made a new survey this year on new four mass-transit routes including the Airport Link between Phaya Thai and Suvarnabhumi Airport which is scheduled to be completed next year; the Purple Line between Bang Sue and Bang Yai, the Blue Line from Bang Sue to Tha Pra and Hua Lamphong to Bang Khae. It found 41 condominium projects with 23,000 units for sale, 80% of which were newly launched. In total, there were 175 projects with 66,000 units, 55% of which were being constructed. The remaining 45% was split equally between completed units and those which had yet to be built. "We cannot avoid the aftermath of the global credit crunch," Mr Samma warned. "Banks will tighten mortgage loans and rejection rates will rise next year. As a result, it's likely that the outstanding number of condominium units will increase due to a large number of untransferrable units." However, he suggested that if fewer new units were added to the market next year, the condominium market would reach equilibrium. Mr Samma said the political problem and the global financial crisis would delay real estate purchases and reduce speculation. Speculators wanted to have cash in hand when they have less expectation on price appreciation. REIC also compiled a housing-developer sentiment index by surveying 28 listed developers and 118 non-listed firms. It found that the index in the third quarter dropped to 43.8 from 45.0 in the second quarter, the lowest of the past four quarters. "Confidence was lower from the political situation and the global economy being hit by the credit crunch," he said. The index of listed and non-listed firms was down to 49.1 from 50.9 and 38.4 from 39.1 respectively. Developers' confidence was declining in almost every aspect except for costs as steel and oil prices stabilised after swinging wildly in the first half, Mr Samma said. Over the past four quarters, the index was highest in the first quarter of this year, at 55.3, due to the announcement of the government's tax incentives. Meanwhile, the second-quarter index at 45.0 was affected by the protests of the People's Alliance for Democracy.

 

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