Optimism beginning to return after last year’s calamity but new flood fears have buyers and sellers on edge.
Bangkok’s second-hand housing market has improved considerably after struggling in the wake of last year’s heavy floods. There is still lingering uncertainty about how the capital will deal with the 2012 flood season, but if no major calamities occur, the resale residential market should be fully back to normal next year.
Thais are more willing to buy old houses first and demand is growing after last year’s floods. But the market still remains edgy until buyers see how floods this year are handled.
Somsak Muneepeerakul, president of the Real Estate Brokers Association of Thailand (REBA), said the second-hand housing market began recovering in the second quarter of this year.
Last year’s flood devastation slowed the market for about six months and many homebuyers delayed their purchases. Some were busy renovating their houses and not looking for new places to live.
However, demand picked up considerably toward midyear as people grew more confident, and many had already decided on a location for a purchase.
“In fact, the second-hand housing market has a lot of potential to grow in the future on the back of demand from end-users,” said Mr Somsak.
“If an uncontrollable factor like the flood happens again, the market will veer off course. But I’m confident that if we can handle the situation properly, we can survive.”
Pumipat Sinacharoen, CEO of Bangkok Citismart, a brokerage subsidiary of Asian Property Development Plc (AP), said the second-hand housing market should rise in line with the country’s economic expansion, estimated in the range of 5% to 5.5% by most economists.
In fact, the second-hand housing market in Bangkok is huge. No matter if you are looking for detached houses, townhouses, shophouses and condominiums, there are many good choices.
Its market size and value have increased significantly after the sharp growth of supply from the first-hand home market, Mr Pumipat said.
The demand side, meanwhile, is getting a boost from Thai people who are more willing to buy second-hand units than in the past.
“Their attitudes are changing toward old houses and they can buy a bigger one when they earn more in the future,’’ he added.
Some people buy a second-hand home or townhouse at a lower price in a location they like or closer to the city centre, rather than buying a brand-new unit at the same price on the outskirts of Bangkok.
Mr Pumipat said the resale condominium segment remained active also, as many homebuyers are looking to buy units in projects located along mass-transit systems.
At the same time, there is a rise in supply from newly finished condominiums in city areas. Speculators and investors sell their units in the resale market to make profits, so resale condominium transactions are expected to remain high.
“Buyers who miss some chances to buy brand-new condominium units will look for resale units as they know that the prices are still reasonable. Now, newly launched condo projects are setting their selling prices higher every day,’’ he added.
The major reason why new condos command higher prices is that construction and land costs are going up. Construction costs have risen 10% since the start of this year.
Meanwhile, land plots located along mass-transit routes are appreciating in price markedly because of high development demand.
Visit Kunatharakul, managing director of Realty World Alliance, a leading brokerage, said rising construction costs would drive the second-hand home market to grow by 5-7% in 2012-13.
New houses will cost more given increases in construction costs led by oil, raw materials and wages, which are 300 baht a day in Bangkok and some provinces already. But homes built five to eight years ago are now 20% cheaper than new units.
However, the flood factor is still haunting the second-hand home market, he said.
The overall market had just returned to a good condition for two or three months and then the flood threat arose again.
“In my opinion, people with potential demand will delay their purchases for at least two months as buyers want to see whether the new flood will affect Bangkok or not,’’ he said.
Mr Visit noted that the resale condo segment may see the least impact but low-rise residential zones in suburban areas such as Bang Bua Thong, Bang Yai, Rangsit and Lam Luk Ka are facing a lot of uncertainties again.
In fact, these locations have just recovered for a slump in the third quarter.
Buyers’ confidence had only started to revive and some had begun showing interest in resale houses in Bang Bua Thong.
“I think these flood-risk areas will take some more time to recover if they are inundated. But if there are no floods, they will be back on track next year,’’ Mr Visit said.
The veteran broker said demand for second-hand houses had mushroomed in only some locations that were not flooded last year. Prices of second-hand houses in the areas hit hard by the flood have dropped by least 20%.