Why rising property prices don’t make sense

property prices
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Recent media reports have suggested the per sqm property prices for Bangkok condominiums in the sub THB 50,000 per sqm sector have risen by up to 13.7 percent in the last year.

To me, this does not make any sense whatsoever.

A survey conducted by Thailand’s Real Estate Information Center (REIC) said the rise was due to limited new launches within that price range.

“Without new supply in the market, existing projects in this segment raised sales prices of the remaining units or new phases,” said REIC.

Property prices at the lower-end of the Bangkok condo market increased by as much as 6.9 percent from the second to the third quarter.

The Huai Khwang, Chatuchak and Din Daeng areas of the Thai capital saw yearly rises of up to 16.4 percent, it added.

So why does this ‘fact’ not make sense?

Firstly, the areas of Bangkok that have seen the highest rises in property prices, according to the research, are suburban locations – the same locations that are home to a large supply of built but unsold units.

Whilst it may be true that no new launches have taken place recently, that does not mean there are no new units on the market at prices below THB 50,000 per sqm.

I’m aware of numerous developments in these suburban locations that have more than 50 percent of units left unsold.

Another fact is that rising property prices will do nothing to help people get onto the property ladder.

Criteria for obtaining mortgages from Thai banks has become far more rigorous in the past couple of years, so any price gains will do nothing to help those who need to finance their property purchases.

Thailand property developers are savvy. One reason why no new launches have happened is because many are waiting for their current inventory of new units to be absorbed into the market.

No one has mentioned that, until now.

Andrew Batt
The author of this article is Andrew Batt, the founder and editor of www.thailandproperty.news. Andrew has been writing about property and real estate issues in Thailand and Southeast Asia for more than 10 years. He has worked for PropertyGuru Group, DDproperty, Dot Property Group, Hipflat and AsiaRents. He has also produced content for leading Thailand property developers and real estate agencies.
Email: andrew.thailandpropertynews@gmail.com.

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