Outlook for Commercial Real Estate in Thailand
Outlook for Commercial Real Estate in Thailand
Commercial real estate in Thailand appears to have a positive future, according to the latest research from Business Monitor International.
The organisation’s Thailand Real Estate Report revealed that more than 200 new projects to build condominiums and other apartments are due to start in Bangkok during 2011-12.
According to the study, attempts by the Thai government to restrict access to credit for buyers of such residences have had a minimal effect on the market.
In addition, it noted that vacancy rates in the city’s offices have improved compared to 2010, while new infrastructure schemes are also expected to boost the appeal of Bangkok.
Managing director of Jones Lang Lasalle Suphin Mechuchep recently commented that political stability is required if real growth in the property sector is to be realised.
She stated: “It is clear that confidence in Thailand’s real estate market relies a lot on the country’s political situation.” Ms Mechuchep added that the slow pace of recovery for the industry compared to the nation’s strong economic growth is a case in point.
Thailand’s sovereign rating outlook has improved because of stronger resilience against external volatility and a healthy banking sector during the past few years, but political risks and fiscal sustainability remain key constraints on an upgrade, according to Fitch Ratings.
Fitch revised its outlook on Thailand’s BBB sovereign rating to stable from negative in May.
“The revision reflected a decrease in concerns on the impact of political crisis and less deterioration of public finance than we had expected,” said Andrew Colquhoun, senior director and head of sovereigns for Asia and Pacific.
He said the key factors for an upgrade of the country’s sovereign rating were primarily domestic, notably risks associated with politics.
“Public debt per gross domestic product has remained below the median among the countries with BBB ratings,” he said yesterday. “In terms of the deeper structure, revenue and overall discipline have been within the ceiling. We are watching carefully the fiscal strategy of the new government.”
External stability, marked by low short-term external debt and high foreign reserves, is the key strength of a sovereign rating. Impacts from uncertainties in the world economy are a threat to ratings.
“Political risk is a major negative factor, but it has had limited impact so far. Politics is a judgemental part. It’s a developing process,” he said. “The Thai sovereign rating has remained relatively good in the region. It stood at two notches above Indonesia and two notches below Malaysia.”
Mr Colquhoun said governance was another element of the political component, and in this area Thailand needed to improve. A World Bank study showed relatively poor performance in public-sector efficiency, regulatory quality, control of corruption and rule of law, compared with the median for BBB-rated countries.
Thailand is among the Asian countries, excepting China and Vietnam, whose banking system is sound enough to withstand external shocks, added Mark Young, Fitch Ratings’ managing director and head of the bank group for Asia and Pacific.
Fitch currently has a BBB rating with a stable outlook for Bangkok Bank, Kasikornbank and Siam Commercial Bank.
The world economic slowdown could aid attempts by some regional policymakers to cool bank lending and slowing rise in asset prices, he said.
“But given the growing interconnectedness between China and other Asia-Pacific countries, a Chinese slowdown will be negative for the region,” Mr Young added.
Prasarn Trairatvorakul, the Bank of Thailand governor, said China’s robust domestic demand, which had helped strengthen trade among Asian economies, could help cushion the region from adverse impacts from a possible downturn in advanced economies. Seventy percent of Indonesia’s exports to China are for its final consumption, along with 50% of those from Singaporean and 40% of those from South Korea.
“We cannot rule out the possibility that the US may need to find creative policy actions to stimulate its economy,” Dr Prasarn said. “And the impact of these efforts on emerging markets can be quite unpredictable and inconsistent with economic theories, due to the dollar’s status as the international currency status and safe haven.”
Nevertheless, the central bank would focus on keeping the inflation low to preserve people’s purchasing power; reducing wealth disparities; and minimising economic risks that might come from excessive bank lending, fiscal spending and asset price bubbles, he said.
“The economy is running at its potential,” Dr Prasarn said. “We now have appropriate space for policymaking, thanks to the previous increases of the policy interest rate.”
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com
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