Bangkok condo glut looming
By Jon Fernquest |
"Fewer potential buyers and many condo units left unsold."
That's the prediction for next year's Thai real estate market by the Real Estate Information Center (REIC).
There are two types of real estate loans that are likely to be affected by the ongoing global credit crunch: 1. construction loans to condo developers, and 2. mortgage loans to condo buyers.
The global credit crunch may cause delays in some condo projects:
New project launches should be delayed if developers' financial status is not strong enough because financial institutions will be more careful in releasing both project loans to developers and mortgage loans to homebuyers.
Thailand's relatively new mass transit systems have been magnets for condominium developments.
REIC carried out two surveys to find out how many condos were being developed near both existing mass transit lines as well as lines planned for the future:
Survey 1: An REIC survey on outstanding condominium supply from October 2007 to September 2008 showed there were 134 projects with a total of around 43,000 units offered for sale, rising from 121 projects with 34,000 units surveyed in October 2006 to September 2007.Of the number, 60% were carried over from 2006 and 40% were newly launched in 2007. The survey covered locations within two kilometres from the current mass BTS and MRT mass-transit lines as well as new BTS extension lines in the Onnuj-Baring and Taksin-Bang Wah areas.
What do all these details mean? First of all, this survey covered condos that are likely to be located within walking distance of mass transit lines likely to completed in the near future. There was a modest rise of 11% in condo projects but a larger rise of 26% in total units.
Survey 2: REIC also made a new survey this year on new four mass-transit routes including the Airport Link between Phaya Thai and Suvarnabhumi Airport which is scheduled to be completed next year; the Purple Line between Bang Sue and Bang Yai, the Blue Line from Bang Sue to Tha Pra and Hua Lamphong to Bang Khae.It found 41 condominium projects with 23,000 units for sale, 80% of which were newly launched. In total, there were 175 projects with 66,000 units, 55% of which were being constructed. The remaining 45% was split equally between completed units and those which had yet to be built.
This survey included condos within walking distance of mass transit lines that are likely to be completed within the next five years. With 66,000 units versus 43,000 units near already completed mass transit lines (53% more), it looks like within five years there will be a lot more condos located near mass transit lines.
The only problem may be financing these projects if there are problems in international credit markets and banking.
The good news is that steel and oil prices have "stabilised after swinging wildly in the first half [of the year]."
Read an a previous article on a survey by REIC and more articles on condos in the real estate sections of Business Blog and Easy Business English.
(Source: Bangkok Post, business, 22-10-08, KANANA KATHARANGSIPORN, temp-link)
Vocabulary:
a glut - too many on the market
looming - event about to happen, will likely happen in a short time
potential buyers - people who might buy, but who have not decided yet
condo units - apartments in condomimium buildings
Real Estate Information Center (REIC) - an agency established by the Thai government to provide better information on real estate demand and supply in Thailand after the 1997 crisis (See background and website)
condo developers - companies that build condominium buildings as a business
mortgage loans - home loans
a credit crunch - a pweriod of time when it is difficult to get a loan, when banks are not making many loans
financial status - how strong your balance sheet is (assets greater than liabilities) and therefore how likely you will be able to pay back the loan
financial institutions - banks and other bank-like companies that give loans
releasing project loans to developers - proving money to builders so that they can finish building the condos they are working on (loans typically given in installments, not all at once)
magnets for Y - attracts Y, draws people to Y
condominium development -
s
outstanding - still existing, not completed or sold yet
outstanding condominium supply - have not been sold yet
mass-transit lines, mass transit systems -
BTS extension lines - longer Skytrain tracks now reach Thonburi and further down Sukhumvit Road
a modest rise - increased, but not a big increase
stabilised after swinging wildly - prices not moving much anymore after moving a plot (suddenly jumping up)
