Bangkok--28 Nov--century 21 Thailand Team
The historical inundation will have an impact across Thai property market, but it will vary in degree and extent. In the short-term, business is likely to slow down as people will be busy solving their own problems. Overall, the flooding will result in changes in demand in residential in terms of preferred locations and product. Positively, this flood has forced many cities in Thailand to revise the city planning and put more emphasis on law enforcement in case officials and people try to trespassing the planning to buy, sell or build on floodway or canal areas. It is also very essential for the local administration to let the public know which area has high risk of being flooded so that people can easily make their decisions when looking for properties.
In terms of location, the CBD which includes Rajprasong, Silom, and prime Sukhumvit will be the most preferred area. Areas along the BTS line from Saphan Khwai to Bearing will see rising demand from both developers and condo-buyers as these areas were not affected by the flooding. For short-term, land prices in locations that submerged will drop by about 20 percent, while land prices in locations that did not face floods will benefit from this. Possibly, demand for high-rise condominiums is likely to go up as people do not want to buy low-rises with their entire life savings and one day the water takes it all away.
The flood has hit many residential areas in the western and northern parts of greater Bangkok, where the real estate market has been booming in recent years. One short-term impact could be significant: before the floods, most customers, especially the young working people, may not even have considered flooding as a key risk factor in their buying decisions. That perception will change, at least for the short term. The importance of flood risk and how each developer manages flooding will have a significant impact on customers' buying decisions.
The impact on the economy could also affect demand in terms of both income and sentiment. In short term, construction costs could rise because of high demand from households for construction materials to repair and fix houses. In addition, the condominium market may also get boost from fear of future flooding. Also, home-buyers considering buying residential properties will definitely pay more attention to the height of land fill, design features and flood preventive measures of individual developments. Developers also need to ensure flood prevention measures and features are incorporated when launching new developments.
After this unprecedented flooding is over, we predict that home-buyers are likely to shift their focus to condominiums and ensure housing projects in the provinces are in flood-free zones. There will be a renewal of interest in condominium projects after the recent slowdown due to concerns of a property bubble. Residents have seen that low-rise detached houses and townhouses became vulnerable during the recent flooding and hence there is likely to be a surge in demand for condominiums. Property developers are expected to focus on condominium segment while they must redesign their current projects to ensure these projects can withstand severe floods in the future.
On the other hand, we forecast a better outlook for vacation home markets in Pattaya, Chonburi, Hua-Hin, Cha-am and nearby provinces which will definitely benefit from this crisis. Bangkok residents with disposable income are willing to purchase holiday homes out of Bangkok as many residents are now retreating to Pattaya and Hua-Hin. The evacuation of Bangkok residents out of the city is also benefiting the hotel market where it is seeing a surge in occupancy for hotels and serviced apartments in Pattaya and Hua-Hin. Bangkok on the contrary is facing a drop in occupancy with cancellations from overseas tour groups and with travel warnings for Thailand. However, given the resilience of Thailand’s tourism industry, we expect tourist arrivals to quickly rebound once the flooding is over (Travel Warning for Thailand) The office and retail sectors will experience minimal short-term impact. The office sector is experiencing a short-term slow down as businesses are delaying decisions, while the retail business is experiencing a slow down or closure in some areas which are directly affected by the inundation. In the long-term, retailers may re-think their distribution strategy and consider a wider geographical dispersion of their distribution centers in order to minimize the impact from any future crisis. However, we believe the retail sector will quickly recover right after the water recedes.
The heavily affected is obviously the industrial sector. At present, it is difficult to predict how long the recovery process will take, but in the short-term the impact is severe with widespread disruption in the manufacturing and distribution chain. The recovery process will be strongly underpinned by the government’s effectiveness in implementing supporting measures, as well as the individual industrial estate operators’ measures to bring factories back into operation. Going forward, whilst existing operations will restart soon, it is very critical for Thai government to rebuild confidence and take effective measures to prevent similar disasters from reoccurring in the future, if not, Thailand is at risk of losing its credibility and FDI. Overall, the government needs to have a well-planned recovery program which is very essential to the whole property market in order to drive Thailand’s economy back to its normal track. (Research by century 21 Thailand Team)
CENTURY21 Thailand Corporate Communication Department
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