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13 Jan 2017

Real Estate and Construction

New Homes for Sale in Greater Bangkok Up 5-7% in 2017 (Current Issue No. 2813)

 The anemic residential market in 2016 forced most property developers to focus on marketing unsold residential units and delay new projects. As a result, the supply-demand balance in the market has been adjusted. However, since property developers must maintain income growth, they will likely launch new residential projects later on. We at KResearch are of the view that new homes for sale in Greater Bangkok will reach perhaps 107,000-109,000 units in 2017, increasing 5-7 percent YoY.

It is expected that property developers will continue to face challenges in selling property because of a projected increase in mortgage rates that should not only inhibit homebuyers, but steepen the interest burdens on current borrowers. To cope with this, property developers may have to introduce new promotional campaigns that differ from current collaborations with financial institutions to offer promotions with low or zero interest rates for a limited time. Since higher mortgage rates may dampen home buying, we expect that the number of unsold homes at the end of 2017 may increase 4-8 percent YoY.

Moreover, competition in the residential market will likely heighten in 2017 amid subdued consumer purchasing power. As a result, major property developers and investors may use their advantages to venture into other businesses, e.g., property management services, or perhaps develop mixed-used projects to diversify their income streams. Medium-sized property developers may seek to enhance their competitiveness by forming joint ventures with international partners.

Real Estate and Construction