Buying Property in Thailand – Wait – No recovery until 2011

Thailand’s property market is unlikely to recover from the current slowdown until 2011, according to Aliwassa Pathnadabutr, managing director of real estate advisers CB Richard Ellis Thailand. According to CBRE, prices and transactions across all segments were down Q4 2008, and the market may retreat another 20%, the biggest fall since the 1997 financial crisis.

“When we saw demand in the property market dropping, we suggested to our customers that they wait and see what happens. As a result our customers suspended investments in the last quarter of 2008,” said Aliwassa.

The market will only recover when the global economy itself enters a positive phase, which most analysts believe will not be before 2011. The luxury condominium market was the first segment to be hit by both the global financial crisis and domestic political instability.

“Demand for downtown condominiums, especially luxury condominiums, has fallen significantly, from both domestic and foreign buyers, in the last quarter of 2008.”

As of end 2008, Bangkok has between 6,000 and 7,000 unsold downtown condominium units, and this inventory will take at least two years to clear.The commercial sector is also beginning to come under downwards pressure as multinational firms feel the full effects of the global slowdown and rein in their spending by cutting down office space and reducing staff numbers. This is likely to lead to increased vacancy rates in both the office and serviced apartments segments.

Thailand’s economic growth slowed more than expected in 2008, despite increases in rice and rubber exports, and like many overheated emerging economies is likely to see bigger than average drops in property values. The lingering political uncertainty has caused investment prospects to fall by the wayside, as protests and court cases against the Prime Minister Samak Sundaravej has reduced consumer confidence.