SPRINGTIME FOR HOUSING MARKETS

       After a very weak first three months of this year,local demandis spurring sales of condos in Bangkok and other Asian cities By Nina Suebsukcharoen

       After 12 months of significant change in global property markets, the green shoots of recovery are now appearing around Asia, but it is local buyers rather than international investors who are driving the markets forward, says James Pitchon, executive director of CB Richard Ellis (CBRE) in Thailand.
       This welcome improvement in Asia comes after very poor lending practices in US residential property market triggered the global problems. Prices fell dramatically in some markets, such as Spain and the US. In Asia,it was Singapore that was worst affected by dwindling values - mainly because it had witnessed steep price increases.
       "But one characteristic throughout Asia has been that locals are buying in their own market - Vietnamese are buying in Vietnam,Thais are buying in Thailand and Shanghainese in Shanghai so that is the Asian theme,"said Mr Pitchon.
       Where Thailand is concerned, it had been expected that even without the impact of the global financial crisis,2009 would be a stress test for the property market because of a big jump in the supply of central Bangkok condominiums.
       Research by CBRE shows that as many as 10,000 units are due to be completed this year, taking the current supply in the central area to 68,000 units.
       Mr Pitchon warned that with this many units coming onstream it is yet to be seen whether developers will make significant moves to clear their inventory. It is also not fully clear how many of these units were sold to end-users who are ready to move in, as opposed to investors who plan to rent them out or speculators who plan to flip them for profit. The two latter groups may not have sufficient financial resources to complete these transactions.
       "That is the story unfolding. Property markets do not move like stock markets they are more like oil tankers and it takes a long time for them to change direction."
       After very weak demand during the first three months of this year with the Bangkok condominium market stuck because there were so few transactions, there was more activity after Songkran. However, this was driven by local demand, similar to the rest of Asia.
       "In the luxury sector, an area we specialise in,80% of the new buyers are Thai, whereas before up to 50% of the purchasers would be foreigners. So we have seen a very distinct change in purchaser profile," said Mr Pitchon.
       Although every development is different,Mr Pitchon has observed that some luxury projects, particularly those approaching completion or just completed, have slashed prices by 10 to 20% from what had been listed."And local buyers seem to accept that; they believe that this discount is sufficient and prices are not going to fall further. In fact,some buyers feel that we may already be at the bottom of the market."
       However, the market is also being buffeted by speculators having to resell their units.While foreign speculators have no possibility to borrow money, Thai dabblers can still apply for loans to pay the remaining 70%.
       The impact of this resale surge could drag on because it takes up to 12 months for developers to transfer all the units in a completed project as they usually have to rectify some of them.
       A shadow still lingers amid these early signs of improvement, in the form of a drop in new project launches this year. Mr Pitchon expects this situation to continue, at least in the luxury sector, until the existing inventory has been cleared.
       "It's not possible for me to put a precise date on it but I think we are looking at a 12-to 18-month period of market consolidation while we see units under construction completed and filled up."
       He said that those who are hoping that the Thai market will fall as steeply as in Spain or Florida will be disappointed.
       "Our 'boom' was much more subdued than in many other countries. Our prices did not inflate as much, and so Bangkok has not been as badly affected as other markets by the global financial crisis."
       It is also unlikely that Thais will look to Singapore and buy property at much lower prices there because there are still capital restrictions in place and it is easier to manage property in a market one is familiar with.
       Mr Pitchon then remarked that resort markets are very different from Bangkok,being almost totally driven by foreign demand.
       "First of all, the big difference between Phuket and Samui is that almost all the buyers -95%- are traditionally foreigners buying a holiday home, very much a discretionary purchase.
       "Also different is the way these projects were funded. The downpayments were much greater; in some cases up to 80% or 90% of the purchase price was paid in downpayment.
       "What we are seeing is that what had been sold in Phuket and Samui has been built. But at present we are seeing very little in the way of new sales and we are not seeing existing property being sold at substantial discounts.
       "So the market has really come to a halt in these places, whereas the Bangkok market has two sources of demand - foreign and Thai."
       Another encouraging sign for Bangkok is that developers are now less rigid in their pricing and have adjusted prices to levels that create sales, which has had the effect of significantly improving demand.
       "So I don't expect that we will see the Bangkok market crash," said Mr Ptichon,adding that the supply is concentrated in the city centre, but overall the supply of new condominiums is still significantly less throughout Bangkok compared to 1996 and 1997.