'No danger' of Pattaya condominium oversupply

'No danger' of Pattaya condominium oversupply

Pattaya's condominium market will not see an oversupply, as projects with a large number of unsold units are unlikely to get off the ground, says an industry expert.

"An oversupply will not happen in the Pattaya condo market like what happened in the 1997 financial crisis," said Simon Derville, deputy vice-president of the SET-listed developer Raimon Land Plc.

"Any projects that have a sales rate lower than than the bank's requirement will be subject to denial for financing for construction. This scenario will not increase the number of unsold units in the market."

Banks usually require developers to have a sales rate of more than 50% for condo projects.

Raimon research shows four Pattaya projects with a total of 1,700 units have been put on hold due to funding problems.

Condo units launched during the second half of 2012 and the first half of this year numbered 13,152 in 30 projects, down by 8.1% year-on-year, with a take-up rate of 48%.

The absorption rate of new launches was 526 units a month, down from 658 a year earlier.

Based on this rate, it should take about 13 months to absorb the remaining inventory.

Mr Derville said there is growing demand from Thai buyers, driven by Bangkok-based developers launching projects in Pattaya.

While Thai demand accounts for 54% of sales, 31 nationalities have bought Pattaya condos, led by Russians (13%).

Emerging markets with high growth include Japanese and Chinese buyers (both 2%).

Average selling prices rose by 21.2% to 71,357 baht a square metre due largely to higher land and development costs.

Condo prices in Pattaya will remain stagnant over the next 12 months as the take-up rate remains low with a large number of unsold units in the pipeline, Mr Derville said.

Raimon reported the number of condo units newly completed in Pattaya from July 2012 to June 2013 totalled 5,543 from 13 projects, up from 731 units in the previous 12 months.

The take-up rate rose to 87% from 81.9%.

From 2013-16, 24,824 units are expected to be completed in Pattaya, probably outpacing real demand. Of this number, 6,553 and 8,803 units will be added in 2013 and 2014, respectively.

In Bangkok, condo launches next year will likely expand to the outer area due to rising construction and land prices, while new supply in the inner city will be limited and in the high-priced segment, Mr Derville said.

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