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29 Jul 2016

Real Estate and Construction

Housing Demand to Wane in 2H16, Affecting New Projects (Current Issue No. 2757 Full Ed.)

The government measure to reduce fees on real estate ownership transfers and mortgage registrations came to an end on April 28, 2016. Since that stimulus did help boost home ownership transfers for a time, its expiration will likely cause transfer activity to fall in 2H16. While implemented, latent housing demand absorbed many units up until April. KResearch expects that the number of transferred units in Bangkok Metropolitan Region (BMR) will be at 119,000-120,000 units in 2016, growing 2-3 percent YoY.
The number of unsold residential units in BMR at the 2016 year-end will perhaps diminish from the 2015 year-end, owing to the short-term benefit of the state stimulus measure. On top of that, developers have put their sales plans for the finished projects on hold. We project that the number of unsold units will probably total 150,000-160,000 by the end of 2016, downt 4 to 10 percent YoY.
Although the number of unsold residential units will decrease, our economic recovery remains patchy amid weakening purchasing power. Moreover, the real estate stimulus has already taken up part of the housing demand in the market. Bearing that in mind, developers' month inventory – denoting the months required to clear stock – will be perhaps 18-22 months this year, close to last year.

To handle such a slowing market, developers can stimulate demand by offering promotions that include mortgage interest discounts, and by considering potential homeowners' needs and limitations more thoroughly to be able to develop residential projects that cater to their needs better. As for the new Land and Building Tax Bill, B.E…. – which is slated to be enforced in 2017 – we believe that it may boost land sales activity for housing development. Thus, developers with undeveloped land on hand may decide to commence new projects sooner.

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Real Estate and Construction