Planned new supply for Q4 'still too high'
The sales rate for new Bangkok condo supply in the fourth quarter is forecast to hit a record low if developers insist on introducing as many new units as planned.
Phattarachai Taweewong, associate director of property consultant Colliers International Thailand's research department, said the planned new condo supply from developers in the fourth quarter is excessive.
"Though many developers have slashed their new condo supply in the fourth quarter, delaying it until next year, the amount is still too high," he said. "They should revise down more." Colliers estimates the number of new condo supply being launched in Bangkok in the fourth quarter at 15,000-17,000 units. This number is the most up-to-date after subtracting the amount developers postponed to next year. Despite the downgrade, new condo supply in the quarter remains high. Many projects were delayed from the first half after new lending curbs took effect on April 1. "The sales rate in the second and third quarters was very low at less than 50%," Mr Phattarachai said. "Weak sentiment will continue into next year if there are no incentives to stimulate demand."
The sales rate of new condo supply launched in the second quarter was the lowest in the past 20 quarters or five years. The last lowest was in the first quarter of 2014 at 35%, amid a political crisis, but it picked up to 64% in the second quarter. Mr Phattarachai said condo demand this year has slowed due to slowing economic growth, the stronger baht and loan-to-value (LTV) limits. The full-year figure will drop by 30% from the usual 35,000-40,000 units to 25,000-30,000, he said. Of the usual amount of condo demand, real buyers account for 60%, investors represent 30% and foreign buyers take up the rest. But investors and foreign buyers have faded from the market because of the LTV curbs, the global slowdown and the strong baht.
"Some developers cannot delay launches, as they're concerned that this will affect presale targets and business plans for next year," Mr Phattarachai said. "If developers do not revise down more, inventory will rise." According to Colliers, new condo supply launched in the third quarter totalled 11,059 units from 24 projects worth a combined 46.66 billion baht. Of the amount, 66% were from listed developers. The sales rate in the third quarter rose to 45% from 40% in the second, but it was down from 64% in the same period last year. Some 68% of the units sold were from listed firms.
New supply priced between 100,000 and 200,000 baht per square metre saw the highest sales rate at 47%, followed by less than 100,000 baht per sq m at 40%.Mr Phattarachai said most new condo supply launched in the third quarter was large in scale with more than 1,000 units per project. Most were in locations near under-construction mass transit lines like the Orange Line. "New supply not only competes with each other, but also with supply launched earlier," he said. "Many projects launched in the past and sold out during the presale period had many units returned by buyers who were unable to get units transferred after the projects were completed."