Bangkok real estate: Investment activity slows as buyers hold out for price cuts

Despite continued interest and more properties offered for sale, investment activity in the Bangkok property market has been subdued as there remains a wide gap between buyers’ and sellers’ price expectations, according to Jones Lang LaSalle, a professional services firm specializing in real estate.

Suphin Mechuchep, managing director of Jones Lang LaSalle (Thailand), said “Buy-side interest in the Bangkok property market remains strong; however, investors are mostly looking for distressed assets offered at deeply discounted prices. At the same time, sellers refuse to dispose of their property assets at a loss, despite accepting the softer market conditions. As a result, investment activity in the Bangkok property market over recent months has stagnated, with buyers continuing to adopt a wait-and-see attitude, expecting prices to drop in response to the perception of value.”

Umpon Thepnumsommanus, director of investments at Jones Lang LaSalle, further commented: “Over recent months, we have continued to receive enquiries from investors looking for large land plots, office buildings or industrial properties available for sale in and around Bangkok. However, all of the enquiries were driven by the search for distressed property assets.

“We have also been appointed by several landlords to help dispose of their real estate assets, ranging from vacant land plots and sites for redevelopment to office buildings. A number of these properties belong to companies that are looking to dispose surplus properties and shore up their balance sheets,” he said.

“Whilst buyers are expecting to acquire the property at a deeply discounted price, sellers have yet to encounter financial conditions which would force them to accept losses on disposing of these properties,” Umpon explains. “We have so far seen certain landlords only willing to reduce asking prices.”

“The general consensus is that property values are trending downward. However, the magnitude of the decline in property values is highly uncertain,” said Suphin.

“There have been very few property investment transactions since last year to date. As a result, real transactions against which to benchmark are scarce.

“As long as leverage does not become a major issue, asking prices could hold sway. While it may be frustrating for buyers expecting bargains in distressed property, we have so far yet to see any distress which would force a sale. Furthermore, owners may continue to absorb the opportunity costs associated with leaving real estate underutilized,” Suphin commented.

The Thai government however has recently pledged to introduce taxes on unused land in an effort to widen its revenue collection base.

Whilst the government may need up to two years to draft the new property tax structure, some parties have already expressed concerns over the plan, which may mean additional burdens on landowners and push land values down as holding vacant land becomes more expensive.

From : Asia Property Report - February 03 - News