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Developers need to guard against risk of housing oversupply
Bangkok Post, February 16, 2010

Dr. Sopon Pornchokchai
President, Thai Appraisal Foundation

The housing market slowed a bit in 2009 but will require some scrutiny in the months ahead to prevent an oversupply. Agency for Real Estate Affairs, the largest real estate information and valuation centre in Thailand, just released a survey on its outlook for the housing market for the Bangkok Metropolitan Region.

At the end of 2009, there were 1,183 housing projects for sale in Bangkok, and of those 843 had more than 20 units available per project. These were considered active projects. In this Asean region, Bangkok had the largest number of projects for sale.

Last year 283 residential projects were launched, a drop from 331 in 2008 and 375 in 2007. There were 57,604 units launched, a 15% dip from 2008. However, the total value of projects launched in 2009 was the same as in 2008.

The average offered prices of units launched increased from 2.289 million baht in 2007 to 2.718 million in 2008 and 3.177 million baht last year. This suggests that lower-priced units were offered less frequently and there might have been some shrinkage of affordability among lower and middle-income households in Bangkok.

Comparing publicly listed companies on the Stock Exchange of Thailand to private companies, the 30 listed companies accounted for 55% of the value of developments and 56% of the number of units launched in 2009. The prominence of listed companies reflects the fact that privately held developers opted to wait until there was less risk for investment.

Pruksa Real Estate, the largest real estate company in Thailand, launched 40 projects with 9,471 units worth 17.412 billion baht in 2009, representing 16.4% of the total units and 9.5% of the total value of developments. Other major developers were Asian Property Development (14.039 billion baht), Sansiri (13.887 billion) and Land & Houses (13.351 billion).

The total of existing and newly launched units booked by buyers in 2009 was 59,085. This implies efficient liquidity in the market because it was more than the number of units launched. However, 109,331 units remain to be sold in 2010, 2.5% of the total existing housing stock in Bangkok. During the 1997-99 crisis, this proportion increased to 5%, a more worrisome figure.

A warning sign is apparent as well. The year 2009 was the first since 2003 that the number of units launched, 57,604, was smaller than the number of housing units completely built, which totalled 65,282. These were units offered by developers and excluded individually self-built units. This is a sign of oversupply. In 2010, cheap housing units costing less than 1.2 million baht are being encouraged with a tax deduction from the Board of Investment. This will also accelerate supply.

The survey shows detached houses worth 1-3 million baht are still popular with middle-income residents. Lower-priced townhouses are also popular, as are condominium units worth 3-5 million baht located near mass transit.

Dr Sopon Pornchokchai is the president of the Agency for Real Estate Affairs, the country's largest real estate information and valuation centre. Contact sopon@area.co.th.

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