The virus crisis has wiped a whopping 150 billion baht ($4.8 billion) off the value of the residential market in Bangkok and surrounding provinces, Krungthai Bank Pcl research revealed on July 16.
Meanwhile, the reservation rate for new apartments and houses fell from 20 per cent in the fourth quarter of last year to 15 per cent in the first quarter of this year before falling again in the second quarter to 12 per cent.
Phacharaphot Nuntramas, director of the bank’s Compass research centre, said the property business has been hit hard by the Covid-19 crisis, with demand for new residences still falling.
Domestic consumers have been affected by an economy expected to shrink by up to 8.8 per cent this year, while foreigners – especially the Chinese – were hit by lockdown measures that hindered purchase or transfer of ownership, he added.
The research centre estimates the value of the residence market in Bangkok and nearby provinces has dropped by 27 per cent from 570 to 420 billion baht.
Phacharaphot said businesses may have to suspend construction of new projects until the economy recovers.
“Unsold stock could expand by five per cent this year to reach 185,000 units, although developers have cut new projects by 40 per cent compared to the last year,” he added.
He estimates the residential market will take four or five years to return to levels seen before the virus outbreak.
He also expressed concern over the trend of non-performing loans in the property and business sectors, saying it needed to be monitored.
The Real Estate Information Centre (REIC) reported that the current situation index, which reflects property developers’ confidence in the market in Bangkok and perimeter areas, fell for the fifth successive quarter.
The REIC is a unit of state-owned Government Housing Bank, which reports to the Ministry of Finance.
It said the index fell to 42.6 as of the second quarter of this year, from 44.4 in the same period last year.
Its director Wichai Wiratkaphan said: “The current situation index has been on the downward trend for five consecutive quarters now.
“The reason behind this, besides the Covid-19 situation, is the use of macroprudential measures by the Bank of Thailand that requires commercial banks to employ the LTV [loan to value] practice to limit the loan granted to home buyers.
“The LTV has greatly reduced customers’ purchasing power while the supply of new properties is still climbing.”
He said property developers who are not listed on the Stock Exchange of Thailand tended to have less confidence in the current situation compared to their listed counterparts, due to the different size of capital and the ability to take risks.
THE NATION (THAILAND)/ASIA NEWS NETWORK