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Fitch Ratings:Housing Demand Slows in Thailand

Posted by admin on November 19, 2013

Fitch Ratings:Housing Demand Slows in Thailand

According to global rating agency Fitch Ratings, residential developers face the prospect of slowing growth as the expected weakening in consumer purchasing power is likely to suppress housing demand in Thailand.

Banks have tightened up on lending to individuals, as household debt had soared to almost 80% of gross domestic product as of the end of June. This could raise the mortgage rejection rate and delay the purchasing decisions of new customers.

Launches in the first nine months rose 28.5% by units and 36.2% in value from the same period last year, according to the Agency for Real Estate Affairs.

Most of the new projects are condominiums, and many are likely to be completed this year. This would take this year’s condo completions to a record level, according to CBRE Research Thailand, Colliers International Thailand and some large developers.

However, there may be some construction delays due to the chronic labour shortage.

In Fitch’s view, the impact on large listed developers with strong brands and well-diversified product portfolios should be limited, given their ability to adjust their product mix to maintain their take-up rates.

The shift in developers’ strategies to the changing environment is also evident through the slower launches in September, as well as a shift of focus to the higher income segment.

With continued urbanisation and economic growth, this risk of widespread oversupply should not be imminent. A glut may surface only in some locations, especially in areas where developers are targeting lower-middle to low-income home-buyers.

However, the competition among large developers is likely to intensify and may put pressure on prices and margins.

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