Having approved a new Constitution, with campaigning against it being punishable by 10 years in prison, Thailand seems fated to perpetual government by military junta. Even if there is an election in 2017, the prime minister will be appointed by the military, as will a powerful 250-seat Senate. But with Thailand’s urban electors thoroughly tired of street demonstrations and clashes, for the moment many seem willing to tolerate what they’ve got. After all, Bangkok’s middle and upper class was especially irritated by Thaksin Shinawatra’s populist and corrupt rule.
For the property market, which is losing steam, all this arguably matters less than the fact that Thailand’s economy is weak. Thailand is set to grow at a slower pace than most other nations in Southeast Asia, according to the IMF, its long-term prospects weighed down by structural problems including “rapid population aging, relatively low education quality and skill sets, and overdue structural transformation.” It underperformed much of the region with 3.2% growth in the first quarter of 2016, according to the Bureau of Trade and Economic Indices. The IMF forecasts the Thai economy will expand by 3% in 2016, and by 3.2% in 2017.
The property market has meanwhile been slowing:
- The condominium segment saw price rises slow to 4.7% (5.2% inflation-adjusted) during the year to Q1 2016, down from 8.9% (9.5% inflation-adjusted) during the year to Q1 2015, according to the Bank of Thailand (BoT).
- Townhouse price rises decelerated to 3.1% (3.6% inflation-adjusted) during the year to Q1 2016, from 7.3% (7.8% inflation-adjusted) during the year to Q1 2015; although the figure is a slight improvement from the previous quarter’s 3.0% growth (3.9% inflation-adjusted).
- The single-detached housing market dropped, albeit slightly, by 0.1% during the year to Q1 2016 (0.4% inflation-adjusted) – compared to price growth a year ago of 6.5% (7% inflation-adjusted).
Developers should be cautious in property development as “the economy remains slow, with high household debt, and low prices of agricultural products having an impact on consumers’ purchasing power,” has warned Bank of Thailand (BoT) Senior Director Don Nakornthab
Land development licenses issued for residential buildings during the first three months of 2016 fell 31% compared to the same period in 2015, according to the BoT.
Developers are visibly worried. Nothing makes this clearer than the aggressive marketing campaigns launched to boost second-quarter sales:
- LPN Development has a marketing campaign for Lumpini Township Rangsit-Klong 1, that allows potential buyers to rent for the first year, with the rent paid treated as a down payment on the mortgage.
- A “Free to stay in the first year” promotion was launched by Pruksa Real Estate for its nine Pruksa Ville projects.
- Property Perfect offers a zero-interest deal for the first year. Customers pay just Bt3,000 monthly instalments per Bt1 million of the loan during the first year. Transfer charges are waived.
- AP (Thailand) has an “Amazing 5 of Baan Klang Muang” promotion, offering a special fixed interest rate of 3.5% for the first five years of a mortgage.
- Sansiri has the “555 Like” campaign. Home-buyers need pay monthly instalments of only Bt555 for the first year of a mortgage.
- Ananda Development has a “Live Now by Ananda” promotion, giving buyers free transfer and mortgage fees.
All these incentives are in parallel to the “Baan Pracha Rath” incentives under which the state-owned Government Housing Bank and the Government Savings Bank give qualified buyers loans at below-market interest rates and relaxed mortgage approval criteria for homes priced up to THB 1.5 million (USD 40,000).