Bangkok Property Market Begins to Slow

The Bangkok property market has slowed down over the year following last September's coup as economic factors continue to be unfavourable due to persistently sluggish consumption and investment, according to the Thailand office of the international consultancy Jones Lang LaSalle.

Most property segments continued to expand over the past 12 months, with rentals and capital values rising further in some segments but at a relatively slower pace, said Dan Tantisunthorn, head of research for JLL in Thailand.

He said the endorsement of the new constitution, which set the stage for a general election on Dec 23, had lifted sentiment in general to a certain degree.

"However, we believe the property market will not see any significant activity before general elections are held and a new government is formed in 2008," he added.

JLL viewed that the property market was hit by a number of surprises over the first few months after the coup. These include the Bank of Thailand's reserve requirement on short-term capital inflows in an effort to curb the strengthening baht, the New Year's Eve bombings and proposed amendments to the Foreign Business Act (FBA).

All of these dampened the market outlook for 2007.

It said the proposed amendments to the FBA had had the strongest impact on the property market and continued to dim the outlook.

Demand in the office and retail sectors has been most affected by the proposed amendments. Existing international companies and retailers appear reluctant to expand their businesses, opting to wait and see how the new act will affect foreign business operations in Thailand. The establishment of new multinational companies has been scarce.

On the property investment front, the proposed amendments have highlighted impediments foreign institutions face to real estate investment in Thailand, JLL said.

The law is very specific in that, with few exceptions, foreign entities are prohibited from owning land in Thailand.

However, these proposed legislative amendments have yet to be pass and many hope they will remain that way and should be reviewed by a newly elected government, JLL said.

Source: Bangkokpost.com