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Thailand Real Estate Report Q3 2011
Business Monitor International, June 2011, Pages: 56
Business Monitor International's Thailand Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Thailand's Real Estate industry.
Since the military coup in 2006, the political situation in Thailand has been uncertain. There are worries that changes in leadership may complicate ongoing policies, leading to uncertainty for companies. Deputy Prime Minister Suthep Thaugsuban announced that elections will be held by June 2011. In the lead-up to the elections, we expect the incidence of protests to rise sharply, dampening investor sentiment. Massive political disruption is one possible outcome.
Despite political uncertainty, economic growth has been strong in Thailand in 2010. Real GDP growth reached 3.8% y-o-y in Q410, taking full-year 2010 growth to a 15-year high of 7.8%. Notably, inventory restocking made up the bulk of growth, contributing 3.2pp to headline growth, while private consumption made the second largest contribution at 2.6pp. For 2011, BMI holds a cautiously optimistic outlook for the Thai economy, but note that the high base effect from 2010 and the winding down of the inventory restocking cycle will mean that growth will moderate sharply. Currently, we project real GDP growth to slow to 3.6% in 2011 before accelerating to 4.0% in 2012.
For the time being, most protagonists in the country’s commercial real estate sector remain upbeat. In spite of early moves by the Bank of Thailand to restrict the availability of credit to buyers of condominiums, developers are looking to initiate over 200 projects across greater Bangkok in 2011-12. In the office sector, vacancy rates continue to run at early double-digit levels – although absorption in Q111 had picked up relative to the previous corresponding period. Large scale infrastructure projects (particularly in relation to transport infrastructure) are changing the economic geography of the country – and generally to the advantage of developers. Over the longer-term, the ASEAN Economic Community, which will allow for up to 70% foreign (ASEAN) participation in Thailand’s services industries, should also be helpful.
Still, the challenges remain substantial. The main ones can, perhaps, best be summarised as diminished competitiveness. In manufacturing, Thailand is losing ground to Vietnam and China. There are as yet few signs that government policies to promote the relocation to Bangkok of regional corporate headquarters is having an effect.
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