Thailand: The virus and Bangkok property
The outbreak of the coronavirus has affected the property market in Bangkok, in particular the retail and condominium segments. People are travelling less and avoiding crowded places including shopping malls to reduce the risk of falling ill.
“This event is hitting the retail market and has caused a significant decrease in traffic inside many shopping malls,” said Punnee Sritanyalucksana, chief operating officer and head of retail at Edmund Tie Research (Thailand).
“Sales volumes of luxury and fashion items in some malls dropped by 20-25% in early February. With the outbreak expected to have a continuing impact on retail malls, landlords are looking for mutual solutions with their anchors and tenants to ride out this difficult situation.
“Rental revenues could decrease a little in the first quarter of 2020 because some anchors and tenants pay rentals as a percentage of their gross revenues. The occupancy rate in the retail market is expected to be steady in the first quarter of 2020.”
The office market is forecast to experience minimal impact from the virus. Office buildings under construction and scheduled to be completed in the first quarter of 2020 are believed to be on schedule, but plans for new office developments could be suspended by some developers until conditions ease.
In the residential market, an earlier projection made in the fourth quarter of 2019 by Edmund Tie Research Thailand was for demand to gradually recover in 2020 after a weak 2019, barring any unexpected events.
However, the foreign buyer market in particular has been hit hard by the virus outbreak. The average take-up rate of newly launched condominiums in the central business district of Bangkok is forecast to be around 25% in the first quarter, down from 36% in the fourth quarter of 2019.
Key factors that will slow the take-up rate include travel restrictions, the current condo oversupply, a wait-and-see attitude among speculators, the strong baht and the global economic slowdown.
All these factors will result in weaker demand and will cause developers to offer more attractive promotions in the form of higher cash discounts, fully furnished units, gift vouchers, freebies and fee waivers.
The Bangkok condo market, which used to be a haven for speculators, has now become a buyers’ market.
To survive the change, many developers are focusing on the luxury segment and projects for which there is real end-user demand, which are less likely to be affected by unfavourable external factors.