Bangkok, November 23, 2018 – CBRE, a global real estate consulting firm reports that several factors are contributing to uncertainty in the residential market of Bangkok. Although many new projects have been launched, sales from Thai buyers have begun to slow down in certain areas and may continue to decline due to stricter lending measures that will take effect next year. Some developers are trying to find locations that meet the needs of Thai buyers who are purchasing for personal residence and are developing projects at price levels that align with the market's purchasing power. Some developers are increasing the proportion of sales to foreign buyers who may purchase for investment rather than actual residence. The rental market for foreign residents in the city center remains stable, but CBRE believes that the rental market for Thai residents in the outskirts and suburban areas is not experiencing significant growth in rental prices, leading investors who buy condominiums for rental purposes to potentially not receive the expected returns.

         Recently, the Bank of Thailand has implemented stricter regulations on housing loans by reducing the loan-to-value (LTV) ratio for certain buyer groups to mitigate credit risk and real estate market risks, as well as to improve the quality of housing loans. This will take effect from April 1, 2019, onwards. This new measure will benefit first-time homebuyers, who represent genuine housing demand, more than investors who buy properties to rent out for returns, which often involves multiple loan agreements. Although this measure does not require developers to charge a minimum down payment in contracts, it will encourage developers to demand higher down payments to reduce risks if customers abandon their deposits at the time of transfer. This will decrease demand from speculators, as they will need to provide down payments of 20-30%, compared to the current requirement of only 10-15%. This measure will help cool down the market and create overall stability.

         As domestic demand is expected to slow down due to the new housing loan requirements, CBRE anticipates that this will lead developers to rely more on foreign buyers who primarily purchase properties with their own funds, as all funds must be transferred from abroad in foreign currency to comply with regulations regarding foreign ownership of condominiums. Many developers have reported increased condominium sales from foreign buyers, particularly from Chinese buyers, both through individual purchases and bulk purchases via Chinese real estate agents. Several projects have disclosed that their quotas for foreign buyers are already full (49% of saleable area), an occurrence that has rarely happened in the past.

         “This raises concerns for CBRE about whether relying heavily on sales to foreign customers is beneficial, as it is uncertain whether these foreign buyers will transfer ownership if they are speculators, and it is unclear who will actually reside in the condominiums once construction is completed. Most foreign customers are investors and may not have genuine demand for actual residence,” said Ms. Aliwasa Patanathabutr, Managing Director of CBRE Thailand.

         According to a survey by CBRE's research department, in Q3 2018, approximately 7,200 new condominium units were launched in the city center, compared to only 1,300 units combined in the first two quarters of the year. The number of new condominiums launched in central Bangkok during the first three quarters of this year increased by 8% compared to the same period last year.

         The average asking price for freehold high-end condominiums under construction in central Bangkok has slightly increased by about 1.7% per year, reaching 277,000 baht per square meter. CBRE does not believe that the average price in central Bangkok will decrease unless there are completed projects with a significant number of unsold units. According to developers, sales of condominiums in the city center under construction have dropped to 67% compared to 77% during the same period last year. CBRE views that the sales trend will likely slow down for most condominium projects in the city center as buyers become more selective, especially for projects priced above 300,000 baht per square meter. Developers aiming to achieve high selling prices must ensure that their projects genuinely justify the price.

         CBRE's research department reported that in Q3, a total of 18,200 new condominium units were launched in midtown and suburban areas, marking the highest number of launches since Q3 2013. The number of condominiums launched in the midtown area during the first three quarters of 2018 decreased by 4% compared to the same period last year. Currently, developers are focusing on locations along future subway lines, such as the extension of the BTS Green Line, the extension of the Blue Line subway, and the Orange, Yellow, and Pink subway lines that are currently under construction.

Thank you for the information from www.cbre.co.th