IN a bleak projection of the coronavirus-wracked Thai real estate market Century 21 (Thailand) Company said developers are now facing liquidity problems and have started selling their assets to keep afloat with land prices expected to drop by 20-30% in the second half of this year, PostToday reported this afternoon (7.5.2020).
Kittisak Jampathipphong, president and founder of Century 21 (Thailand) Co. Ltd, said these problems stem from sales and revenue not meeting financial obligations with this leading to developers knocking on the government’s door for soft loans.
However the government would set conditions before releasing the loans and could ask the developers to first sell their property and slash prices to clear the stocks in hand.
At the same time many companies have had to reduce their burden by cutting salaries, laying off workers and negotiating debt restructuring with their creditors.
Mr Kittisak pointed out that the residential market has slowed down for one to two years now through continuous supply but demand not catching up through slower economic growth. This has led to an oversupply in many areas as developers have tended to move in and compete in the same sections, especially the condominium segment.
Further rocking the real estate market is that foreign funds that had come in to finance Thai developers had led to land prices jumping higher but as people’s buying power was not strong enough for the higher-priced homes, it triggered the price war we are witnessing today.
Developers had then tried to tap real demand but this became tougher after Bank of Thailand announced mortgage loan supervision measures, and as this was followed by the coronavirus pandemic, the demand has now disappeared for at least one year because everyone is now waiting to see whether the property market will sink lower.
As Mr Kittisak sees it, a one-month lockdown requires a year to revive this key industry, and a two-month duration two years, because it will take that long for the economy to revive. For this reason the residential market will slow down considerably the next one to two years.
It has therefore turned into a buyer’s market, Mr Kittisak said, with developers rushing to clear their stocks through competitive pricing while their foreign allies, particularly from Japan and China, would consider withdrawing their investment because they too have been heavily impacted.
The commercial property market too has been strongly affected, particularly hotels and resorts, with tourism having plunged and occupancy rate during the past two to three months being just 3 to 5%, which can be considered an historic low point.
Many hotels owners have had to lay off workers and some even shutting shop and unless the government gives timely help, this industry will plunge into a severe crisis.
In trying maintain liquidity and reduce their debts over the next two years developers will be selling their hotels and resorts plus land from their land bank
Mr Kittisak said some big developers have already announced the sale of some land plots and more will come into the market in the third and fourth quarters of this year,
However it is uncertain whether people will buy or not because everyone is in the same boat and this will lead to land prices dropping by 20-30% in the second half, he said, adding that the market will not see the sale of 2 to 3 million baht a square wah land plots as their owners would switch to long-term lease.
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Top: Prime downtown Bangkok where some of the city’s most expensive real estate is located. Photo: Thai Newsroom
Below: Mr Kittisak foresees a rough ride for the Thai property market. Thai headline says, “Covid caused land price to plunge, sliding 30%.” Photo: PostToday
