The Good, the Bad and the Ugly! No, this is not a review of Clint Eastwood’s classic spaghetti Western but is hopefully an action-packed look at Thailand’s economy and Pattaya’s real estate market.
There are many twists and turns in Thai politics, the Thai economy and especially our local Eastern Seaboard construction industry; it is as dramatic as any good ‘B’ movie you have ever seen.
Let us get started with the ‘Good’; that certainly is what seems to be coming from Thailand’s current leader, Prime Minister Prayut Chan-ocha. In a recent survey, the Department of Mental Health found that Thai people were much happier during the second half of 2014, after the military takeover and under the new government. Before the political turmoil, the happiness level among Thais was rated as moderate. Once the turbulence escalated the happiness level plunged – dropping continuously in 2014. By the second half of the year, when Prayut came into power, the level of happiness gradually began rising.
In another study conducted by Suan Dusit Rajabhat University, it was discovered that most Thais think that Thai politics are a lot better since the coup. The majority of those surveyed felt that political conflicts within the country had noticeably subsided under the leadership of Prime Minister Prayut Chan-ocha. Compared to the period before the coup, Thailand’s political situation is now more peaceful in their opinion.
A day later, The Nation reported that martial law was the reason behind a spike in tourist arrivals in the second half of last year, a government representative said. That is not only good, it is great news and shows that just maybe military men can show politicians a little about protocol and how to run a country.
That’s not all of the good news. Bloomberg News recently revealed that Thailand ranked at the top among 51 of the world’s happiest economies – just ahead of Switzerland, Japan, South Korea and Taiwan.
Leading asset managers are predicting that the Stock Exchange of Thailand (SET) index still has a chance to hit 1700 and even 1800 basis points this year and more than 2,000 investment projects worth THB1.4 trillion applied for promotional privileges from the Board of Investment last December. For the year as a whole, 3,469 investment projects with a value of THB2.1 trillion applied for such privileges—the highest in the last 50 years in terms of investment value. The number of projects seeking promotional privileges grew 73 percent year on year while the value grew 117 percent.
Now for the ‘Bad’. Things are not looking so good for the world’s real estate industry as there are signs everywhere of oversupply and slow downs. Industry pundits such as Jacob Maslow, Editor and Publisher of the Rapid News Network, is asking, “Will a potential Chinese housing crash trigger a global financial shock?” Maslow was speaking of China’s overheated and highly oversupplied real estate market with millions of homes just sitting unsold.
He recently wrote,\: “The interesting thing about China’s real estate market is that, unlike the U.S. market which uses real-time pricing, the Chinese real estate aims to sell inventory at ‘official’ prices. The scary thing about this is that the ‘official’ prices are elevated and people are not buying. Chinese consumers have kept their cool so well that real estate prices have started to drift down”.
If that doesn’t say enough about China’s real estate industry, consider that SOHO China Limited – the largest prime office real-estate developer in China – suffered a 45 percent decline in profits last year.
And even though we have heard all the hype about American real estate hot spots and a 16 percent jump in Chinese buyers, America’s real estate market still appears to have a long way before any substantial and real recovery.
The big question is: With all these years of financial stimulus, is the American financial system heading into another 2008-type mortgage-related crash?
Regionally, Singapore has always been the pacesetter for ASEAN real estate trends. The latest figures show declining values for Singapore properties and a substantial increase in repossessions.
This is where the “Ugly” comes in, as Pattaya’s condominium construction industry seems to be recklessly heading towards a crash.
Yes, I used the ‘C’ word that has been on the lips of Eastern Seaboard and Bangkok residents for months.
We are starting to see developers offer higher and higher commissions – as high as 9, 12 and 15 percent, which supports the perception that new condominiums are not selling well. Observers have been talking about a condominium oversupply for a couple years now, and today the huge supply of condominiums coming on the market – combined with the loss of the major buyers such as Russians and Thais – has created a picture that is just plain ugly.
We can only hope that the Chinese, who are arriving in larger and larger numbers, start picking up the remaining stock of condominium units and save the Pattaya condominium market from what looks like an inevitable fall.
This column was contributed by Clayton Wade, Managing Director of Pattaya’s Premier Homes Real Estate Co., the Eastern Seaboard’s leader in exclusive property sales and rentals. www.premierinternational.com.
If you wish to contribute your own opinion email andrew@propertyguru.com.sg.
