Residential market expected to improve with more supply and higher value in 2021, think-tank said

The Real Estate Information Center (REIC) said this week that Thailand’s residential market would improve in 2021 – with more supply units and thicker values from more project launches.

Vichai Viratkapan, Acting Director-General of REIC, said that property developers have delayed the launch of new projects throughout the country, following the adjustment of loan to value (LTV) measures ahead of the economic crisis caused by COVID-19.

When the lockdowns hit early in 2020, the residential sales shrunk even more, especially among the condominium units due to travel restrictions that suspended foreigners from entering the country, Vichai added.

Consequently, Thailand’s property market outlook from the REIC for this year sees a 46.6 per cent decrease in the number of new supply units, excluding second-hand houses, to 79,408 units. In 2019, the database recorded 148,639 of the new supply units.

In those statistics, the housing estates contracted 34.7 per cent and condominiums contracted 59.2 per cent. While the value of new housing units dropped 30.6 per cent to 422 billion baht from 609 billion baht last year.

2021 outlook

Vichai said that in the 2021 the number of new supply units is expected to increase by 11.9 per cent and the housing value to grow 3.9 per cent. Sale units among housing estates would scale up 4.1 per cent and condominiums are likely to surge 25.1 per cent.

The sales of the condominium almost declined by half, causing the remaining supply in the second half of 2020. The REIC sees an increase of 6.1 per cent from 301,098 units in 2019 to 319,528 in 2020 when this year comes to an end.

Thailand’s housing market in 2021 would expand its remaining unit sales by 6.3 per cent, adding the value of 4.8 per cent, due to many project launches. Whereas the condominium market would grow 16.5 per cent, given that the foreign demand will be still laggard.

Meanwhile, the latest GDP projection, according to the central bank of Thailand, sees a 6.6 per cent contraction this year and 3.2 per cent growth for 2021. 

Analyst valuation

Napat Vorajanyavong, an analyst at KGI securities, anticipates Thailand’s property sector next year to remain mixed between positive and negative factors.

The key positives include economic recovery, continued infrastructure developments in Bangkok Metropolitan Region (BMR), and total supply cut of 40 per cent in the first 10 months of 2020 that should lead to demand/supply adjustment, especially for the condominium market.

While the key negatives are intense price competition for condominiums through the first half of 2021, slow demand from investors (both foreign buyers and lenders), and the relatively high bank rejection rate in the lower/end pricing segments.

“We still prefer developers focusing on mid- to high-end low-rise, and developers who carry high condominium backlogs in 2021F,” said the analyst,

However, key inferior aspects would be developers who have discontinued launch plans in 2020F and developers focusing on the low-end pricing segment. Also, developers with low-level of condominium backlog are likely to continue conducting aggressive price cutting strategies in 2021’s first half.

The KGI analyst said that high-rise outlook would continue to face high competition in 1H21F with the take-up rate for new condominium launches at 25 per cent in October, compared with the average of the previous 12 months at 32 per cent.

“Although we saw a drastic cut in condominium supply of 65 per cent year-on-year in 10M20, we believe the consolidation cycle should continue since the completed inventories have remained high at 90,486 units as of mid-2020, outpacing its 5-year average of 78,000 units.”

However, the outlook for the low-rise segment would be more stable with a take-up rate of 14 per cent in October 2020, compared with the previous 12-month average of 15 per cent as demand has been backed by real buyers as well as less aggressive promotional campaigns on the finished inventories.

KGI maintains a ‘Neutral’ rating on the property sector with a selective play strategy.

The top picks from analysts are stocks that have sizable revenue exposure to mid- to high-end low-rise or have high backlogs of high-rise, including AP Thailand (AP) and Supalai (SPALI).

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