New guidelines add to transparency of Thai real estate market

It is a necessary step in bringing transparency to the Thai real estate market and all emerging sectors, according to Simon Landy, executive chairman of Colliers International Thailand.
 
‘Partially completed buildings have always been something of a grey area when it comes to establishing their true value, not only in Thailand but in many markets around the world. With the anticipated level of merger and acquisition activity in international markets over the next few years, more certainty is required in the way these values are established,’ he explained.
 
This new guideline will provide an internationally recognised benchmark which will assist in bringing transparency and clarity to valuations of incomplete property assets, especially in listed companies,’ he added.
 
Meanwhile others in the industry are concerned that a strong currency could have a negative impact on Thailand’s real estate market. The rapid increase in the US dollar/Thai baht is said to be due to the weakness of the US dollar around the globe and more by continued inflow of foreign capital to Thailand, particularly via the stock market.
 
‘Whilst certain economists encourage the government to reduce interest rates further in effort to curb the baht strength, low interest rates would help property developers burdened with borrowings. They would also benefit the residential sectors as mortgage for home purchases will be less costly for buyers,’ he said but added; ‘However, we expect the impact of the strong Baht to be more negative than positive on the real estate sector’.
 
A stronger Thai baht has diminished the attractiveness of residential and resort real estate in Thailand. Many of these properties are targeted at foreigners either residing in Thailand as a second or retirement residence, or for vacation purposes. These foreign buyers have been getting less for their dollar as the domestic currency has strengthened, he explained.
 
The same trend applies to real estate from a broader investment perspective. Though Thai properties still appear inexpensive relative to comparable product in many other markets around the Asian Pacific region, the prices have risen significantly when quoted in US dollars.
 
‘If overseas investors decide to acquire real estate assets in Thailand now they may have to pay approximately 8% more, compared to the beginning of the year,’ Suphin pointed out.
 
There is also concern about oversupply in the Bangkok residential market. According to Sopon Pornchokchia, president of Thailand’s Agency for Real Estate Affairs,  said that 2009 was the first year since 2003 to witness a situation where the number of units being launched  was smaller than the number of units completed.
 
But the impact of the global economic crisis has had only a slight effect on real estate sales, he revealed. Some 15% fewer units were launched last year than in 2008. But detached houses worth between THB1 million and THB3 million were still popular as were lower priced townhouses and condominium units.