Economic conditions have been weakening in Thailand all year, due mainly to external factors. Consequently, many Thai consumers are concerned about the economy and their long-term income. This is having a growing impact on the property market, especially condominiums, as developers continue to launch new projects.
About 14,180 new condo units were launched in the third quarter of 2019 with a total project value of 68 billion baht. The number of units was up 53% from the second quarter but down 40% from the third quarter of 2018.
Activity has slowed as developers have been focusing on transferring ready-to-move in units as they complete projects begun earlier. So far, most have been reaching their revenue targets or coming close, even as they scale back new projects. New units launched in the first three quarters of 2019 totalled 30,206, a decrease of 33% from the same period in 2018.
Many developers are preferring to sell their units to first-time buyers, who are not affected by the Bank of Thailand's tougher loan-to-value (LTV) rules governing new mortgages. To attract these buyers, most of whom are younger people, some 57% of the new units launched in the third quarter were selling at lower than 100,000 baht per square metre.
Most developers are still more focusing on areas along existing mass transit lines, where 85% of all new units launched in the third quarter are being built. Notably, the market is seeing more projects from small and medium-sized developers, who now account for almost as many units as big listed developers.
Some listed developers are choosing to develop their new projects in sois or smaller roads away from main roads, where they can acquire cheaper land. This will allow them to keep unit costs below 100,000 baht per square metre. Thirty-one percent of new units launched in the first nine months of this year were in buildings of eight floors or lower.
Some condominium projects offering units priced below 3 million baht each have sold out or had a high take-up rate within a few weeks after the official launch. But the average take-up rate of new projects in the third quarter was around 52%. Although higher than the previous quarter, the low rate reflects the fact that purchasing power has still not recovered. As a result, total new condo units launched this year will probably not exceed 45,000.
Although the average take-up rate is not high, units along existing mass-transit lines have done dramatically better than those along lines still under development.
It is also noteworthy that many developers have been offering more housing projects this year, especially townhouses with selling prices of 3 million to 5 million baht per unit. This price range is the most popular in the market and construction takes only a few months. Developers can realise revenue from a townhouse project within one year, compared with 2-3 years for a large high-rise condo.
The number of foreign condominium buyers, meanwhile, continues to decrease, especially the Chinese market which has seen a dramatic decline from last year. The main factor is the weakening of the yuan, which has lost about 10% against the baht this year and 14% since the start of 2018.
Many Chinese buyers who are due to transfer condominium units are concerned about the exchange rate and some buyers do not want to transfer at all. This is because most of the units bought in Bangkok are for investment purpose only. As a result, the number of Chinese buyers is estimated to have decreased by as much as 50% from the past.
Surachet Kongcheep is managing director of Phoenix Property Development and Consultancy Co Ltd.