Bangkok’s property market is experiencing a turbulent period with a very uncertain road to recovery. What started off as a benign cyclical slowdown beginning of 2020, has transformed into a double whammy of distress for Bangkok’s property market with the COVID-19 situation!
While at the time of writing this article, Thailand is successfully containing the spread of the coronavirus with a positive net reduction in newly reported cases of infection, unfortunately the economy is at a standstill.
Inbound flights have been halted until April 18th and a complete shutdown of malls, restaurants and other leisure venues is in force until April 12th. For the first time since the 2008 financial crisis, The Bank of Thailand has predicted that in 2020 the Thai economy will shrink 5.3%.
New Projects: Developer Contingency Planning
The hardest hit by this unexpected “Black Swan” event, have inevitably been Bangkok’s developers. Several leading developers have seen new sales and transfers grind to a worrying halt.
The usually buoyant international buyers of Hong Kong and China, two very important markets for Thai developers in recent years, are putting buying or transfer decisions on hold. This has led several developers to develop contingency plans to try and ride out the current rough patch.
Many developers are choosing to scale back on their new launches and many are focusing on simply clearing their unsold stock. With many choosing to refocus their marketing strategy to target local buyers, to try and plug the gap “temporarily” created by the virus.
Another important reactive market trend is the shift by developers to try and diversify their sources of income. With some developers exploring “recurring income” business models such as serviced apartments or wellness centers.
Rentals: Market Uncertainty, Moving Plans On Hold.
Landlords of rental condos have not been insulated from the slowdown.
Bangkok, especially neighborhoods in the Central Business District, are usually popular rental hubs for working professionals. This renter demographic is very transient and reliant on economic conditions.
The economic slowdown and the local/ global shutdown of borders has spooked expat renters; with many expat residents on temporary short stay visas (I.e. Tourist Visas) preferring to return to their home country.
Some existing tenants, feeling the pinch, are renegotiating their leases or even voluntarily choosing to downsize.
Generally, the renters in the capital plagued by the uncertainty of how the situation will develop, are mostly putting their moving decisions on hold.
Resales: Foreign Sell-off and Local Bargain Hunters
On the resales side, sellers are inevitably reviewing their sales prices downwards and being more realistic with their expectations.
A particularly striking trend are foreign landlords of both completed and off-plan condos looking for a quick exit. Many foreign sellers are putting their properties up for sales with many prepared to take losses, offering large discounts on their properties to potential buyers. Generally, Thai sellers have been more resilient with many preferring to wait and hold.
Interestingly, some cash rich investors, despite the uncertainty, are looking to “buy the dip” with many looking to profit from depressed property prices. Most of these investors tend to be experienced local buyers.
Recovery of the Property Market in the 2nd Half of 2020?
This market overview has been mostly peppered with negative sentiments. The editors felt it was important not to sugarcoat the current market conditions as transparent reporting is a professional obligation!
With so much global uncertainty and panic, it is difficult not to feel that Bangkok’s property market has “Hit” a metaphorical “Pause Button”!
In the best case scenario, Bangkok’s property professionals are hopeful that a rebound can happen in the 2nd half of 2020. However, it is really beyond the scope of the editors to predict recovery trends at this stage.
The best advice that can be provided is probably a cheesy, overused but increasingly relevant quote:
“KEEP CALM and CARRY ON!”
Property professionals, landlords and investors need to hold-on tight in these difficult times.
It is important to keep strong and stay positive.
For now, take care and stay safe!