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No Oversupply in Bangkok Housing Markets
AREA Press Release No. 356/2015: November 23, 2015

Dr.Sopon Pornchokchai, Ph.D. Dip.FIABCI, MRICS
President, Agency for Real Estate Affairs (AREA)

There is a doubt whether there would be oversupplies of housing markets in Bangkok. Dr.Sopon confirms there would be no!

Agency for Real Estate Affairs (AREA) is the largest and first real estate information centre in Thailand since 1994.  Dr.Sopon Pornchokchai, AREA President reviews the situation for investment consideration as follows:

Considering the sales of housing (owner-occupied residential properties) in the open markets in the Bangkok Metropolitan Region, as of mid 2015, there were as many as 1,634 projects offering housing units for sales. This number of the projects is a lot higher than those in Jakarta (350 projects), Manila (200 projects), HCMC (150 projects) and Phnom Penh (100 projects).

In mid 2015, there were some 178,641 units currently offered for sale in the markets. This was a gigantic number; however, it is still manageable by the market mechanisms. Considering the absorption rate, it could be sold within 16 months. Although it was quite slow, it was still no problem. The new number of launching was not too high to be an oversupply. The number of 178,641 units was only 3.7% of the total housing stock compared to 5% during the crisis period during 1997 to 1999.

The estimated number of housing launched in the Bangkok Metropolitan Region this year would be 107,821 units which is some 6% below the number in 2014. However, the value would be Baht 418.006 billion which is some 21% more than the value launched in 2014. This is an extraordinary phenomenon where the number is down but the value is up. This phenomenon happened in Jakarta as well, according the latest survey of the AREA.

If we explore in details, it is found that in 2015, housing units priced at Baht 1-5 million would be down for 16% in the number of units and 10% in terms of value. This implies that the majority of the proprety markets (75%) were down due to the weakening economy of Thailand compared to the rest of the ASEAN countries.

However for the units price below Baht 1 million the number of the units and the value of the development would go up for 25% during 2014 to 2015. Particularly those luxury units priced over baht 20 million, the launching is very aggressive. 

Last year, there were only 449 units with the value of Baht 12.539 billion launched. But in this year, there would be 2,166 units launched (four times more) with the value of 71,807 million (five times more). This implies that although the ordinary people are facing economic trouble, the well-to-do are still fine. They are not much affected by the economic difficulties.

For the projects which were failed or in trouble and closed down, there were 34,038 units at a value of Baht 91.128 billion. This figure was increased only some 9% in the number of projects and 12% in terms of value of the development. These failed projects happened due to the fact that the developers did not conduct proper study prior to the launching.

Another evidence of the healthy markets was the uses of condominium units built  during the 8th to the 36th month of completion along the mass transit (train). Dr.Sopon found in his study in October 2015 that of the total 114,959 units found, 82,356 units (72%) were already occupied.  They were not left vacant.  Of the total units occupied, 80% (65,590 units) were resided by the buyers. Only 16,766 units were resided by the renters.  It could be assumed that two-thirds of the units met the need of the endusers. Therefore, there will be no oversupply.  In addition, the return of investment (capital gain) was 5.1%; whereas, the return on investment (rent) was 5.8% on the average. This is to confirm the strong and healthy markets.

An implication is that since the market is healthy, the government needs not to help the industry and no need to assist the home buyers. One best policy is the “Enabling”. This means to allow the private sector and the public to manage the housing provision themselves. No interference of the government is needed except to regulate the developers and the related professionals such as valuers, brokers and the like.