Bangkok’s condominium market, once a favourite of Chinese investors, faces a bleak year as the novel coronavirus outbreak keeps buyers away.
Foreigners are set to account for as little as 10% of purchases in 2020, down from a fifth two years ago, consultancy Agency for Real Estate Affairs estimates. Chinese buyers used to provide the bulk of overseas interest but are now hampered by the travel curbs and economic havoc sparked by the disease.
“The demand from foreigners may disappear in the first half following the outbreak,” said Sopon Pornchokchai, the consultancy’s president, adding that there are 100,000 vacant condominiums in and around Bangkok. “We’ll need to rely on local buyers, but that won’t be easy.”
The Bank of Thailand has loosened mortgage-lending rules to encourage domestic purchasers but developers remain wary. For instance, Naporn Sunthornchitcharoen, the chief executive of major developer Land & Houses Plc, last month said the firm is “afraid” of the condominium segment.
Even before the coronavirus spread from China, foreign interest was flagging as the outlook for an economy reliant on trade and tourism deteriorated amid currency strength in 2019 and the US-China trade war.
Land & Houses doesn’t plan to open any new condominium projects this year. Another developer, Singha Estate Plc, is “very cautious” about buying land for residential offerings because of concerns about an oversupply of property in certain locations, Head of Investor Relations Maysenee Ratnavijarn said.
The real estate sector slowdown is among the many challenges ahead for the economy in 2020. Gross domestic product growth may slow to as little as 1.5% this year, a six-year low, a government agency forecast last week.
Thailand’s 55-member Property Development Index has tumbled about 19% in the past 12 months, worse than the 9% slide in the overall Thai stock market.
Developers are expected to bring about 6,000 new condominium units to the market in Bangkok in the first quarter of 2020, down 40% from a year earlier, according to Phattarachai Taweewong, associate director of Colliers International Group’s Thai unit.
“It’s tough situation in 2020,” Mr Phattarachai said. “Hopefully the market can go back to balanced supply and demand again in the next three years.”