Can property companies in Thailand weather the current storm?

Thailand's capital city of Bangkok is expecting a slowdown in the property sector. Long term though, it would appear that Asia's property markets can weather the current financial storm.

There is no questioning the effect that US economic slowdown is beginning to have on Asia's property markets. The sub-prime credit crisis has changed economies worldwide which ultimately damages property values. Some regions, though, have experienced the hit harder than others.

For the most part, Asian property markets did well in 2007 and rental and capital growth exceeded expectations in many areas. Investment volumes were up and in a few Asian markets are expected to continue strong throughout 2008.

Despite that fact, Bangkok's performance for 2007 goes contrary to the markets in nearby regions. For the most part, Bangkok's growth was subdued with demand growing only slightly. This poor performance is most often attributed to political instability and a rising cost of living. As the price of oil goes up and the US economy weakens, the cost of living has risen.

The economic slowdown in other areas has also caused the cost of construction to rise in Thailand's capital city. So far, though, analysts say it is important not to be alarmed. Property revenues will be down from Bt1.59 billion to Bt1.5 billion in 2008. A continued slowdown in the US will have strong ramifications in the financial industry, but there will still be investment opportunities in the region. Asian economies are still growing and foreign investors are being welcomed through property law and tax reforms.

The coming year may bring about higher rents especially in the retail and residential sectors. The retail sector is expecting both expansion and higher rent prices. This actually follows a trend to be found throughout Asia with the exception of Beijing. In Beijing, several shopping centres are nearing completion meaning there will be plenty of fresh supply to match the demand. Property companies in Bangkok and other parts of Asia are advised to focus on cost reductions and developing international partnerships in order to post profits for the year.