Interview: Apichart Chutrakul

Is positive growth in the Thai property market leading to concern over a real estate bubble?

APICHART CHUTRAKUL: When speaking about a “bubble” in real estate, we mean that there is too much supply or too little demand. But in the Thai market, there is always plenty of demand. In certain segments there may be too much supply; however, looking at growth around the country, it is fairly stable for Bangkok and for upcountry. Major developers are diversifying into regions that are garnering more interest in order to feed demand. The growth story and competition in the real estate development market will be upcountry going forward, although Bangkok will of course remain a stronghold market for developers with continued global interest. So if people claim a bubble is developing, they need to provide factual information to confirm it. Most data actually points to stable growth in the city, and people are looking to own rather than to rent. So while there is a lot of interest in the domestic market, it would be wrong to claim a bubble is building. Disposable income is rising due to wage increases, mortgage rates remain stable, and the banks not lowering their lending rates to buyers are all helping to balance the market quite well.

How supportive is the current project finance environment, and what is being done to increase developers’ access to loan facilities?

APICHART : Banks are very cautious when it comes to the smaller niche developers, because of what has happened in the recent past with loan overextension. So the larger players with a good track record continue to gain a larger piece of the market, as bank lending practices are more favourable to them.

Unless small-to-midcap players have a unique piece of land and a unique or niche product offering that caters to a specific buying pool, it will be hard for them to convince banks to extend greater loan facilities, because the returns will be next to nothing. Large developers with a vast network, resources and assets get the attention of the banks for lending, not only because they are lending at close to 0%, but also because banks can leverage the cross-selling benefits associated with these operators.

In what ways could government reform land taxes or incentivise landholders to stimulate development of vacant city plots?

APICHART : I think it is important to remain tempered when developing a city that is looking to be as international and dense as Bangkok, so as to avoid building on every vacant plot as soon as possible. If you push owners to use the land, it will not be the most prudent use of the construction and real estate industries’ resources. With increasing minimum wages and a severe shortage of labour to work on the numerous projects, we must be thoughtful and strategically plan where to allocate those resources.

If we are striving for the highest and best use of a certain portion of land, then the owner and developer will likely have already begun the process of development. Furthermore, if there is an oversupply of similar product, then it will be harder to sell, and we will have squandered an opportunity on a valuable land asset. The market should dictate whether to build or not build; the government should not interfere too much or create policies that push for owners to develop their lands for improper uses.

At this point, there are numerous opportunities to purchase land around Bangkok and upcountry. Developers do not need to enter into a bidding war with other competitors anymore because if the prices get out of range, they can move on to the next opportunity. With such a plethora of options at our disposal and so many different areas to build, there needs to be a prudent urban plan on how to develop these assets. We must use our planners to study and determine the best use for these vacant and brownfield regeneration projects. This development strategy will be most beneficial to the majority of stakeholders.