<![CDATA[Coronavirus: Thailand's condominium sector headed for 10-year low as Chinese buyers disappear amid outbreak]>

Thailand's condominium sector is heading for a 10-year low as the Covid-19 pandemic continues to wreak havoc on economies around the world. The postponement of new project launches, discounts on unsold units and the disappearance of Chinese buyers have all worsened the situation.

According to Phattarachai Taweewong, researcher at global real estate services firm Colliers International, this downward trend continued from last year when the Thai real estate sector was affected by a stronger baht, weaker yuan, the slowing Chinese economy and underperforming Thai economy amid a global slowdown.

"This is a very difficult time. Some developers have postponed their launches indefinitely because it is difficult to estimate how long the outbreak would last," he said. "Sales activities and campaigns have stopped. Sales offices have also seen fewer walk-in customers. In the first quarter of 2020, we expect condominium sales in Thailand to be below 35 per cent, which is the lowest in 10 years."

"Sales activities and campaigns have stopped. Sales offices have also seen fewer walk-in customers. In the first quarter of 2020, we expect condominium sales in Thailand to be below 35 per cent [for new units launched], which is the lowest in 10 years."

Sales for new units are usually between 50 per cent and 55 per cent each quarter, Phattarachai added.

The real estate sector accounts for 6 per cent of Thailand's GDP, according to economic think tank Krungsri Research. Thai law stipulates that non-Thais may only legally own condominiums, but no more than 49 per cent of a building's total saleable area.

The significant fall of demand from Chinese buyers has been caused by the travel restrictions Beijing has imposed since the outbreak began, as well as a slowdown in economic activity following the lockdown of several Chinese cities.

Thailand's tourism sector has borne the brunt of this. According to tourism and sports minister Pipat Ratchakitprakarn's estimate, if the coronavirus situation concludes by the end of the year, Thailand will have seen about 10 million tourist arrivals " compared with almost 40 million in 2019.

While the outbreak has also been a challenge for the Thai condominium sector, Georg Chmiel, the executive chairman of property portal Juwai IQI, said Chinese buyers "are still very active online and still have great demand for Thai property".

While these buyers still account for half of all foreign purchases of condominiums in Thailand, Chmiel said there were "practical obstacles to closing transactions and to buyers taking possession".

Somsak Chutisilp " the managing director of IQI Thailand, Juwai IQI's local property-brokerage counterpart " said examples of such obstacles included developers having difficulty locating mainland customers and agents to complete the purchase after the buyers had transferred a down payment of around 30 per cent.

Colliers researcher Phattarachai said this meant developers could not forecast their exact revenue this year. Combined with a coronavirus-forced freeze on launching new projects altogether, he said the sector stood to lose about 28 billion baht (US$868 million).

Difficulties locating mainland buyers who have already put down payments on Thai property mean developers are unable to forecast their revenue. Photo: Bloomberg

"There are online activities for sales, but they won't affect the market so significantly," Phattarachai said, adding that developers also have to deal with oversupply in the market as sales slowed last year due to the Bank of Thailand's tightening loan policy and the effect of a new land tax deal that saw a previously flat tax rate change to varied rates depending on how a property is used.

"There are about unsold 60,000 condominium units in Bangkok, and it would take about 25 months to release this inventory," he said.

Sopon Pornchokchai, president of Thailand's Agency for Real Estate Affairs, estimated there would be some 100,000 vacant condominium units left unsold around the country this year, and that Chinese buyers could return by the year's third quarter at the earliest.

"Foreigners accounted for 14 per cent of condominium purchases last year, down from 17 per cent the year before," he said. "Among them, Chinese buyers account for around 60-70 per cent."

Sopon said in the long run, Thailand could still be an attractive destination for condominium buyers as "it provides better yields, does not limit the minimum spending amount and provides affordable maintenance fees". But at this time, he advised developers to reach out to existing customers abroad and in the country "because it will be difficult to have new customers during the slow economy".

However, Juwai IQI executive Chmiel said there would be a sharp rise in purchases once the crisis is over.

"We expect a surge in transactions later in the year, after the coronavirus outbreak settles down," he said. "Buyers who were held back by travel restrictions and other coronavirus-related challenges will finally make their purchases, and it will feel like they are all doing so at once."

Thailand's health care could be a major motivating factor for Chinese buyers to return, according to Chmiel.

"Thailand can win Chinese-buyer market share from other Asian countries that are not as successful at handling the coronavirus outbreak or that don't have the same high-level medical care," he said.

"Over the longer time frame, Thailand should remain a popular destination for Chinese buyers " most likely one of the top two destinations in the world by number of enquiries in 2021 and 2022."

Phattarachai from Colliers said that with the negative factors surrounding the property sector in Thailand, it was likely to only see a recovery next year. "If the outbreak is under control by the third quarter, developers will recover by the fourth quarter and the market will revive by 2021."

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This article originally appeared on the South China Morning Post (SCMP).

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