Bangkok bubble trouble? Dissecting the facts about Bangkok oversupply

bubble
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Many people may have missed what is likely to have been the most important property article published by the Bangkok Post this year so far, where the publisher claimed there are fears of another property bubble.

According to the leading English language publisher in Thailand, “ … oversupply in the condominium market [is] whipping up fears of another bubble …”.

To support its claim, it said that a continuous rise in mortgage loans, combined with intense competition among financial institutions and numerous projects in the pipeline, have “stirred uneasiness” for financial regulators.

Just last week the governor of the Bank of Thailand was expressing his own concerns regarding he strength of Thailand’s property market. He did not mention a bubble.

Let’s pick some of the most interesting statements from their 2,000-word feature that appeared prominently in print on the front of the paper’s business section.

Quoting Maybank Kim Eng Securities, the wrote: “ … condominium projects outside of the central business district warrant concern because there is a glut, with many units remaining unsold.”

Regarding the low-end of the Bangkok property sector, which was the only sector to record price increases during Q1 according to most published research, the head of Knight Frank Thailand was quoted, saying that low-end market has many financial institutions concerned when considering mortgage loan applications.

“This segment has a lot of non-performing loans,” and “Buyers of residential units priced lower than THB 2 million are the riskiest as their profiles are not good.”

The article said that even though there are a number of condo units returned by buyers who decided to cancel their purchases or halt down payments, the quantity is not concerning for developers as it rarely exceeds 20 percent to 30 percent.

So as many as one in five “sold” units never make it to transfer? That’s high in our opinion and evidence of our observations that speculation in the market is still an issue. What this amounts to a bubble is down to how your interpret what little public data is available.

Tris Rating was also quoted in the article, saying there is an oversupply of condominium projects along the Purple Line and in Bang Wa.

This is an area we know well, and the BTS line from Wong Wang Yai to Bang Wa has certainly been a hotbed for developers in recent years.

The Thonburi side of the river is generally unfavoured by Thai buyers, despite the ease of commuting to other parts of the city through mass-transit links, and even low prices compared with other parts of the city have failed to entice buyers and investors.

Highlighting the issue that Thailand property developers need to think creatively, listed developer LPN was reported to have turned an unsold condo tower of 200 units into apartments for rent.

They are not alone. This has been happening for several years, whether it’s apartments for rent or a hotel.

To deal with those buyers who fail to follow through with their purchases, many developers have opted to take a significant down payment. This can be as much as 40 percent of the total unit price.

As a result, speculators who fail to achieve their desired outcome or secure finance as opting to list their property for sale before transfer. There are many hundreds of there listings on social media groups and on Thailand’s property portals.

You can read the full article from the Bangkok Post, which is also focusing on the plethora of upcoming mixed-use launches in Bangkok, here.

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