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21 Jul 2017

Real Estate and Construction

Property, 2H17: Developers Adopt Wait-and-See Attitude (Current Issue No. 2856 Full Ed.)


 The residential property market was sluggish in 1H17 and that disappointing performance should continue into 2H17, given that consumer purchasing power has not yet fully recovered and labor issues have continued to inhibit the launch of newly-built residential units. However, property developers must continue to invest in order to realize future income, though they may need to be more cautious in 2H17 since the property market remains in the doldrums.

Because of the high number of unsold residential units reported at the 2016 yearend and an over-year contraction in home ownership transfers is forecast for Bangkok during 2017, KResearch is of the view that it should take quite some time for unsold residential units to be absorbed out of the market. Given this, we have assessed that the outstanding inventory of unsold residential units in Greater Bangkok at the 2017 yearend may reach 170,000-177,000 units, increasing 4-8 percent YoY.

With regard to the property market upcountry, we expect that developers will unlikely be able to increase prices, nor quickly sell their outstanding inventory of unsold condominium units there if they are not located in economically prosperous or popular tourism locales.

Because the rising inventory of unsold residential units will be a major challenge for developers who have yet to find a marketing approach to sell them, KResearch believes that developers with many unsold residential units will likely focus on a broader base of potential buyers, including young workers, careerists, families, older persons and foreign nationals. Residential projects currently under construction and those having many unsold units should be more flexible in meeting the needs of such diverse buyers.

Meanwhile, developers may also face a number of other challenges ahead, too, e.g., labor issues, excess inventory in certain locales, hefty household debt, and possibly, interest rate hikes, while still having to close sales as quickly as possible to maintain liquidity

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Real Estate and Construction