No condo 'bubble', says real estate firm
- Published: 11/04/2013 at 01:15 PM
- Online news:
Despite fears that a looming real estate bubble could drive up property prices, there is currently no sign of such problems in the condominium market, according to professional services firm Jones Lang LaSalle.
The specialist property consultancy said it was reasonable that the Bank of Thailand recently asked commercial banks to be more cautious about mortgage lending, particularly to borrowers suspected of buying houses or condominiums for speculative purposes.
A Thai worker on a condominium construction site in Bangkok on August 26, 2012. (AFP Photo )
The concern about a "bubble" is based on an assumption that large numbers of people who have made profits on the stock market may invest the money into housing or condominiums.
Suphin Mechuchep, managing director of Jones Lang LaSalle, said a real estate bubble can occur when there is excess demand from speculative buyers and abundant liquidity through borrowing, that drives property prices to levels well above their fundamental economic value.
"Bubble" conditions can also be caused by developers themselves, undertaking development without proper market studies and planning, leading to overbuilding.
"However, our close monitoring of Bangkok's core and central condominium market shows that the aforementioned conditions do not presently exist," she said.
Although there is a strong growth of new supply and prices of condominiums in both completed buildings and off-plan projects in Bangkok continue to rise, the price increases have been gradual and driven largely by sustained demand expansion, improvements in quality, as well as rising development costs.
Mrs Suphin said it is hard to identify the actual percentage of speculators in the condominium market, though it seems that those in the upper-mid-price segment located in prime locations will have the most potential to make a profit on their investments when construction is near completion or is complete.
But the overall situation is that most buyers are end users who purchase the property for their own use and/or investors looking for an income-generating asset as a long-term investment.
On the supply side, the company argued that most of the new projects are in the mid-price segment (B75,000-100,000 per square metre), to serve growing demand from buyers adopting a more urban lifestyle.
In terms of luxury properties, new launches have slowed down over recent years, allowing the supply under construction to be absorbed by the market.
"Any measures to curb property transactions could simply undermine real estate demand as the intervention could eventually result in added costs to buyers, for whom affordability is ultimately the key issue," Mrs Suphin said.
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