Buyers' new priorities
Post-pandemic trends emerging as demand revives in the Thai residential market, says CBRE
published : 2 Jul 2020 at 04:00
newspaper section: Business
The work-from-home trend, transport route expansion and health-conscious living will become major factors in shaping expectations in the Thai residential market as a result of the Covid-19 outbreak, according to CBRE Thailand.
In the near term, condominium developers are focusing on clearing out their unsold inventory while the detached housing market continues to attract end-user buyers, the property consultancy says.
Since 2019, the condominium market has been affected by the strong baht and tougher loan-to-value (LTV) rules affecting mortgage lending, said Aliwassa Pathnadabutr, managing director of CBRE Thailand.
Signs of market recovery and better understanding of the new Land and Building Tax regulations were emerging late last year, but the sudden arrival of the Covid-19 pandemic has since dampened the market.
Even without the outbreak, the condominium market was moving towards equilibrium as supply was gradually slowing down. The good news is almost no new supply is coming in to compete with existing projects.
Developers have turned their focus to selling their unsold off-plan and completed projects.
On the other hand, the single-detached housing market has been less affected compared to the condominium market. This segment has no speculative demand as most buyers are end users who want to buy for their own residences.
Since the government announced the second phase of lockdown easing, more buyers have been visiting sales galleries and the sales performance is almost at the same level as pre-Covid-19, according to CBRE.
In the condominium market, the number of foreign buyers, especially the Chinese, was declining before the pandemic because of the unfavourable yuan exchange rate, which is a result of China-US trade tensions, said Artitaya Kasemlawan, director of advisory and transaction services (residential sales) with CBRE Thailand.
Travel restrictions from the virus outbreak have also contributed to the decline.
However, demand from foreigners remains and they will comprise a major feeder market once the international travel restrictions have been lifted, she said.
CBRE has witnessed an increase of Chinese buyers in the luxury condominium market compared to five years ago, when Chinese buyers would buy units in the range of 3-10 million baht.
The second condo buyer group consists of short-term speculators, but they have disappeared from the scene after previously accounting for 20-25% of all buyers.
The third group are end users, who still show steady demand. This group has more time to consider projects and more developers are wooing them with special offers.
Since the Covid-19 lockdown was lifted, demand from this group has recovered very quickly to the pre-pandemic level.
Long-term investors make up the fourth group, whose focus is on the price margin, and they are ready to make a purchase if a unit is deemed cheap.
End users and investors appear to still be active in the market, said CBRE.
It is now a buyer's market, whether it be real estate or consumer goods, said the consultancy.
However, property is a product with a number of factors to consider including demand and supply in each area, location, design and sales performance of individual projects. These will influence promotions, especially discounts that are not offered at the same rate.
Buyers will require a considerable amount of time to compare and sales should progress gradually, said CBRE.
"The recovery of the residential market will be divided into two phases," said Ms Aliwassa.
"The first is when business operations return to normal, as many already have begun, but with international travel restrictions, this period will depend on demand from domestic buyers who are expected to take 1-3 months to make their decisions.
"The essential factor is the overall sentiment of the business sector. If there are stimulus measures to boost spending, the market will recover faster, perhaps in the latter part of the third quarter of 2020.
"The second phase of the recovery will take place once international travel reopens, beginning with business trips followed by leisure travel, which could be seen in the fourth quarter based on this year's forecast. This will depend greatly on the government's policies, availability of a vaccine and the ability to prevent a resurgence of the virus."
In addition, she identified two issues likely to become critical for the residential market.
"First is location, which we should keep an eye on. Buyers will choose between the inner city and midtown/suburban areas," said Ms Aliwassa.
"As people are spending more time at home and working from home, the need for space usage will increase. Coupled with mass transit expansion outside the metropolitan area, some buyers will reconsider their housing choices in terms of value related to usable space.
"The other trend is health and environmental care. Developers and designers will have to bear in mind changes in buyers' behaviour and highlight specifications that advance the health and convenience of residents, such as usable area, air quality and new technologies.
"CBRE has already witnessed from past crises where product development was improved in response to changes in the demands of the time. Examples include more compact sizes of condominium units; more efficient unit layouts; fully fitted or fully furnished provisions; and higher quality of specifications.
"It will be interesting to see how new products in the residential market will be developed in response to the changes in buyers' requirements after Covid-19."