Abstract
The Thai economy has been one of the worst hit by the global economic
recession. Plunging exports
combined with a collapse in tourist arrivals
due to on-going political troubles and, to a lesser extent,
swine flu,
caused a 7.1% contraction in the economy in Q109. In the past, we have
identified key issues
facing the Thai real estate market, including the
relatively poor availability of finance and continuing falls
in property
prices and office rentals. These factors have taken on a new dimension due to
the global
recession.
Oversupply has become a bigger issue, further
depressing prices and rental values in all sectors. The
recession has
slammed the brakes on export earnings, and forced many expatriate residents to
leave the
country, further reducing demand. This factor has also forced
attention on the country’s laws with respect
to foreigners owning
property. Condominium buildings must have more than 50% Thai ownership,
and
finding this Thai component has proved difficult for many
developers.
The Bangkok office market has also been hit by the liquidation
of Lehman Brothers’ property portfolio
worth an estimated THB50bn.
The process of disposals is on-going.
Global real estate advisor DTZ
comments reveals many multinational firms are slashing costs by scaling
down expansion plans and looking for ways to minimise occupancy costs. More
tenants are renegotiating
lease terms with landlords or relocating. The
average occupancy rate of Grade A office buildings fell
2.5%
quarter-on-quarter (q-o-q) to 87.4%.
Nevertheless, Grade A office
buildings located in the prime areas, including Central Lumpini and
Sathorn, continued to achieve higher occupancy rates of approximately 90-95%.
However, rents are
falling after recording their first falls (in Q109)
since 2003.
There is similar story with residential rents, which are well
off their Q208 peaks. In that quarter, a record
THB370,000 per sq m was
set for the Sukhothai Residences on Sathorn Road. The average price for a
condominium unit in the Central Lumpini area is now THB112,765 per sq m,
ranking higher than other
popular locations in central Bangkok, according
to commercial real estate firm CB Richard Ellis
Thailand.
The
government has decided to extend the reduction of specific business tax (SBT)
on the transfer of real
estate until March 28 2010. SBT will remain at the
reduced rate of 0.11%, down from the normal 3.3%.
The incentive was
originally introduced in March 2008 in an effort to boost new property sales,
but was
due to expire on 28 March 2009. The extension has a retroactive
effect to March 29 2009. Buyers who
transferred property after that date,
and were charged at 3.3%, can now seek a refund.
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