Some Bangkok property market watchers have said the city faces a bubble situation in its real estate market however, Dr. Sopon Pornchokchai, President of the Agency for Real Estate Affairs, (AREA), confirmed there will be no bubble, but he did not rule out a bust in the near future.
AREA is the largest and most independent real estate information and valuation centre in Thailand and since 1994 has been surveying the market. Dr. Sopon revealed his latest findings this week that looked at the first four months of 2015.
Since January, and taking into account housing or owner-occupied residence alone, there were 30,501 units launched with a total value of THB130.938 billion, according to AREA.
Dr, Sopon noted that this seemed to be a big increase, and said if we simply multiplied these figures by three to make a whole year estimate, the total units launched in 2015 will be 91,503 units with a total value of THB392.814 billion. This value would be even higher than the launched value of THB344.549 billion in 2014, whereas the total units launched in 2014 was slightly higher at 114,229 units.
This was an extraordinary phenomenon, he said.
In detail, Dr.Sopon discovered that during this first four months of 2015 there were 1,163 housing units launched, including owner-occupied apartment or condominiums and luxury detached houses, priced at more than THB20 million per unit. This constitutes only 3.8 percent of supply but in terms of value it was as high as THB43.824 billion – or 33.4 percent of the total value launched.
This might be a myth for people to misunderstand that there will be a bubble, he said.
However, if those units priced at more than THB20 million were not considered, the total units launched during the first four months would be 29,338 with a total value of THB87.114 billion.
If we multiply by three to estimate the total supply for 2015, it would be 88,014 units with a value of THB261.342 billion.
If we compared this with the situation in 2014, we will find supply will be down 22.6 percent in terms of value and 21.3 percent in terms of units.
Considering condominiums or owner-occupied apartments with prices below THB20 million, it is estimated that the supply will be 53,268 units during 2015 compared with 64,961 units last year.
The value would be THB136.2 billion in 2015. This implies the supply of condominiums priced below THB20 million per unit will be down by 18.1 percent in terms of value and 16.9 percent in terms of units.
Dr. Sopon concluded there would not be any bubble in 2015. On the contrary, there could be a bust due to the sudden drop of supply this year. This, he said, would very much be a concern for developers, financiers, government officers and planners, and the economy of Thailand at large.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
