Bangkok Bank has warned of a possible oversupply in the low-rise housing market in Greater Bangkok as many developers flee the sluggish condo sector for the segment.
Phairach Sakwit, senior vice-president for property development at Bangkok Bank, said there were about 300,000 unsold residential units in Greater Bangkok as of the first half of 2020.
According to the Real Estate Information Center (REIC), the largest amount of unsold residential inventory was in condos (107,504 units), followed by townhouses (90,383 units) and single detached houses (60,325 units).
When combined with semi-detached houses totalling 28,693 units, the total number of low-rise houses was 179,401 units, worth a combined 789 billion baht.
The REIC reported a drop in low-rise housing launches in Greater Bangkok during the first half of 6% to 16,218 units, against a sharp decrease of 58% to only 10,083 units in new condo supply launched in the same period.
It forecast a decline of 19.2% to 79,408 units in new residential supply launches in Greater Bangkok this year, down from 98,248 units last year. The two-year average would be 109,859 units.
Total low-rise houses launched in Greater Bangkok this year is expected to rise 12.6% to 48,965 units. The two-year average would be 43,830 units.
On the other hand, new launches of condo units this year would shrink 44.4% to 30,443 units from 54,769 units last year. The two-year average was 66,029 units.
“Developers should think twice when they want to launch a low-rise project as the number of low-rise supply spikes,” Mr Phairach said. “Today seeking a land plot for condo development is easier than for low-rise houses, as many developers have shifted from the condo to the low-rise market.”
He said many homebuyers were looking at a global economic slump worsened by the Covid-19 pandemic.
Some might get trouble from unemployment or have an unstable career, which affects their ability to get a mortgage.
“The government should reconsider the lending curbs criteria to help homebuyers. They should be effective for units completed after 2018,” Mr Phairach said at a property seminar held last Thursday by Bangkok Bank. “Units completed earlier should be excluded.”
He voiced concern about the development of new condo projects in inner-city locations, noting that environmental impact assessment is an issue that could prolong project development.
“The cost of land in the inner city accounts for more than half of total development cost,” Mr Phairach said. “If there is an issue leaving a project unfinished, it may be a problem.”