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Don’t Build Any Low-Price Condo.
AREA Press Release No. 163/2015: June 19, 2015

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

A few days ago, the Prime Minister of Thailand said he would build rental and owner-occupied apartments at a price of Baht 300,000 or at a rent of Baht 1,000-2,000 per month along the mass transit systems in Bangkok to help the poor out of poverty and cost of transportation.  This is not a good idea at all, said by Dr.Sopno Pornchokchai.

Dr. Pornchokchai is worried about the misleading of housing policies n Thailand.  He is President of the Agency for Real Estate Affairs (www.area.co.th) who has been consultants in housing and real estate in many countries and also at related international organizations such as the World Bank and the UN Habitat.  He is also the author of a book, Housing Finance Mechanism in Thailand as well as a co-author of the Global Valuation Practices.

According to the Agency for Real Estate Affairs which is the largest real estate and valuation centre in Thailand, an apartment along the inner city area is offered at Baht 80,000 – 420,000 per sq.metre.  A low-priced apartment would be as small as 20 sq.metres so it would be 1.6 million per unit.  If all the soft costs (operation, tax, interest, profit etc) is taken out, the hard costs would be Baht 1.1 million per unit.  If the government would like to offered at Baht 0.3 million, a subsidy of Baht 0.8 million would be added.  If 100,000 units are planned to build, a total subsidy would be Baht 80 billion.

If this scheme were materialized, there might be some privileged poor who claimed themselves to be poor in order to be eligible to possess a unit of this housing provision.  The markets would be distorted.  Hundreds of thousand of housing units offered for sale or rent today would not be able to be sold, many would just wait for the offers of this scheme.

However, the government will not have enough to build this scheme.  However, a few might be built in order to gain popularity among Thai particularly those who did not accept the coup d’etat.  In addition, the government should spend the money more wisely like the construction of infrastructure and mass transit systems.

Nowadays, there are still tens of thousand of low-priced housing units of the National Housing Authority.  Around some 300,000 units of vacant housing are still available in the markets or on the hands of banks and other financial institutions as well as at many asset management companies and the Legal Execution Department.

In addition, the government should enforce a compulsory escrow account which is on voluntary basis at present in order to create a strong confident to the buyers which will bring more transaction into the markets.  Property tax should be enforced as well in order to strengthen local finance for the development of local infrastructure which will help increase the value of properties.  Turnkey infrastructure and mass transit development on BOT basis should be promoted to create more choices of residential locations to the public.