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Bangkok property market virtually stagnant as buyers expect large discounts

Despite continued interest and more properties offered for sale property transactions are just not happening, according to Suphin Mechuchep, managing director of Jones Lang LaSalle Thailand.

'Buy-side interest in the Bangkok property market remains strong. However, investors are mostly looking for distressed assets offered at deeply discounted prices. At the same time, sellers refuse to dispose of their property assets at a loss, despite accepting the softer market conditions,' he explained.

'As a result, investment activity in the Bangkok property market over recent months has stagnated, with buyers continuing to adopt a wait-and-see attitude, expecting prices to drop in response to the perception of value,' he added.

Over recent months the company has continued to receive enquiries from investors looking for large land plots, office buildings or industrial properties available for sale in and around Bangkok. However, all of the enquiries were driven by the search for distressed property assets.

It has also been appointed by several landlords to help dispose of their real estate assets, ranging from vacant land plots and sites for redevelopment to office buildings. A number of these properties belong to companies that are looking to dispose surplus properties and shore up their balance sheets.

'The general consensus is that property values are trending downward. However, the magnitude of the decline in property values is highly uncertain. There have been very few property investment transactions since last year to date. As a result, real transactions against which to benchmark are scarce,' said Mechuchep.

'As long as leverage does not become a major issue, asking prices could hold sway. While it may be frustrating for buyers expecting bargains in distressed property, we have so far yet to see any distress which would force a sale. Furthermore, owners may continue to absorb the opportunity costs associated with leaving real estate underutilized,' he added.

The Thai government has recently pledged to introduce taxes on unused land in an effort to widen its revenue collection base.

Whilst the government may need up to two years to draft the new property tax structure, some parties have already expressed concerns over the plan, which may mean additional burdens on landowners and push land values down as holding vacant land becomes more expensive.