Developers glimpse potential for slight recovery in 2021

Developers glimpse potential for slight recovery in 2021

After sharp falls across the board in 2020, the residential sector in 2021 is forecast to see only a slight improvement as unsold inventory remains high and many risks from the previous year are likely to spill over into 2021.

Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said new residential supply being launched nationwide in 2021 is projected to rise by 11.9% for unit numbers and 3.9% by value.

However, those increases are from a very low base in 2020, said Mr Vichai.

"Growth [in 2021] will be largely driven by listed developers with an increase of 25.1% in new condo supply and a rise of 4.1% in low-rise houses," he said.

"We expect a 4.2% growth in the number of new residential units sold in 2021, up from a drop of 17% in 2020," said Mr Vichai. "Total sales value in 2021 will rise 3% from a very low base in 2020."

REIC expects the number of new low-rise houses and condos being sold in 2021 would see an increase of 2% and 8.4%, respectively.

In 2020, the Office of the National Economic and Social Development Board predicted the economy in 2021 would grow at 3.5-4.5%, improving from a contraction of 6% forecast in 2020.

Risks remain in 2021, including a new wave of the pandemic at the end of 2020, political conflicts and global economic uncertainty, said Mr Vichai.

He said the volatile economy worldwide continue to trigger more risks from recovering domestic business, particularly in the tourism and hospitality sectors.

As a result, revival of employment in those businesses will take a longer time.

In the property sector, most developers had adjusted strategies by slowing down new launches since 2019, even before the pandemic hit the globe in early 2020.

"They slowed down or delayed new supply launches after residential sales got a negative impact from the loan-to-value limits in April 2019," said Mr Vichai. "When there was a lockdown from late March, sales became more sluggish."

The most affected sector was condos as foreign buyers were unable to travel and sales from those buyers vanished.

As a result, new residential supply launched in 2020 shrank by 46.6% to 79,408 units from 148,639 units a year before.

The largest drop was condo with a decrease of 59.2%, while low-rise houses saw a decline of 34.7%.

Total value of new supply launched also fell 30.6% to 422 billion baht from 609 billion.

On the demand side, the weak number of new residential supply sold in 2020 carried over from 2019 due largely to the lending curbs.

Covid-19 rubbed salt into the wound with a decline of 25.2% in demand to 90,267 units from 120,673 units in 2019.

Condos faced the most dramatic fall of 47.9% in unit number. Low-rise houses saw a decline of 2.8%.

Total value of new residential supply sold saw a drop of 17% to 393 billion baht in 2020 from 474 billion in 2019.

Those declines caused housing inventories nationwide to tally 319,528 units by year-end 2020, up 6.1% from 301,098 units in 2019.

The biggest increase by year-end 2020 would be condos at 18.5% but low-rise houses would see a drop of 1.1%.

Mr Vichai said REIC expected growth in housing inventories nationwide would continue in 2021 with an increase of 6.2% in unit number and 4.8% by value as the number and value of new supply launched was higher than the housing sold.

Condo inventories are expected to see the largest increase with a 16.5% growth as foreign demand continues to shrink until mid-2021, in contrast with low-rise houses which are estimated to see a drop of just 1% amid real demand.

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