Oversupply fears are expected to slow the property market for the next few months but positive sentiment will resume next year supported by real demand, say industry executives.

Concerns about a possible property bubble in Bangkok and the Bank of Thailand's announcement capping condominium mortgages at 90% of value from Jan 1 have quietened the market due to a retreat of speculators and investors, says Mayta Chanchamcharat, director and chief business officer at Pruksa Real Estate Plc.

"Due to the market concerns of some areas being flooded by oversupply and the property bubble, the market today does not absorb [condominium] units as fast as before," Mr Mayta said.

The take-up rate of newly launched condominiums dropped to 45-50% this year from 70-90% in previous years.

Pruksa's newly launched 1,390-unit condominium Fuse Mobius on Bangkok's Ramkhamhaeng Road has recorded pre-sales of 60% since being launched four months ago.

However, Mr Mayta says the BoT measure does not interfere with the market and is beneficial for the property industry as a whole as it allows the market to adjust naturally in terms of demand and supply.

"Such concerns may have delayed speculators but real demand does not feel the impact as much," he said. "It's a preventive measure that makes everyone in the industry including buyers become more cautious, which will lessen the impact if problems do occur."

Mr Mayta says only 30% of banks provide project finance of more than 90% of project value.

Wirote Kappiyajanya, Pruksa's executive vice-president, says improving economic factors will soon bring back positive sentiment.

"Many developers may be delaying their project launches for the moment to keep an eye on whether the situation will become as many have feared," he said. "But the impact will only linger for three to six months before giant developers resume their project expansion again."

Seeing strong demand in lower-end condominiums, Pruksa plans at least two budget projects next year. Each project will be worth about 700 million baht, while unit prices will be below 1 million baht. However, the company has yet to finalise whether the units will fall under the Board of Investment requirement that units must be at least 28 square metres.

Visit Malaisirirat, managing director of Magnolia Quality Development Corp, also sees positive signs in the property market in the coming year.

He believes the mid-to-upper-end segment will continue to do well, although buyers have become increasingly cautious by selecting projects with experienced and strong developers.

With the impact of the strengthening baht on the purchasing power of European and American buyers, Magnolia is looking to focus more on tapping increasingly wealthy Chinese buyers.

Magnolia plans to develop five projects worth a combined 8-10 billion baht next year. Two will be condominiums, with one project worth 3 billion baht in Bangkok's Bang Na district. Of two projects in Khao Yai, one will be a hotel worth 450 million baht.

The company will allocate 10 million baht in building a research and development centre in the second quarter next year. The Magnolia centre will serve as a showroom and a design knowledge centre for its clients and the public.

Magnolia targets sales this year of 900 million baht.

Pruksa (PS) shares closed yesterday on the Stock Exchange of Thailand at 20.60 baht, up 60 satang, in total trade of 308 million baht.

Writer: Pornnalat Prachyakorn
* Published: 30/11/2010 at 12:00 AM
* Newspaper section: Business