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News Release

Bangkok

Baht Strength Unlikely to Hurt Real Estate in the Short Term


19 October 2010 – As the US dollar–Thai baht exchange rate has soared, prices of property assets in Thailand have seen a marked increase when quoted in US dollars. While the baht strength benefits foreigners disposing their Thailand-based property assets at this time as they are getting more in US dollar terms, there is a growing concern over the potential negative impact of the baht appreciation on Thailand’s real estate sector.
 
Mrs. Suphin Mechuchep, Managing Director of Jones Lang LaSalle Thailand, said, “A concern over the possible impact from the stronger baht currency on the property market is growing, particularly in the sectors where foreign buyers are a major source of demand such as Bangkok high-end condominiums and resort properties in key holiday destinations like Phuket.”
 
She commented that the stronger baht currency will diminish the attractiveness of Thailand’s real estate from foreign buyers’ point of view. However, in the short term, Jones Lang LaSalle does not anticipate a significant negative impact on Thailand real estate. This is because the current demand in Thailand's real estate markets has come mainly from local buyers while demand from foreign buyers has dropped significantly over the past few years.
 
“The number of foreigners buying Thai property as a second or retirement residence, as a holiday home, or for investment purposes has seen a marked decline due to the country’s continued political uncertainty, dampened by the global financial crisis,” said Mrs. Suphin. “Since late-2008 when the global financial crisis escalated, buyers from the US and Europe as well the Middle East in particular have disappeared as the economies in these regions suffered most from the global financial crisis.”
 
“From Asia, which has been less affected by the global financial crisis, buyers have been more concerned by the continued political uncertainty in Thailand and as a result have continued to adopt a wait-and-see approach,” Mrs. Suphin added.
 
At a broader perspective, if the stronger baht continues to pose a threat to the export and tourism sectors, which are among the key drivers of the Thai economy, demand for real estate will inevitably be affected at a later stage as it is tied tightly with the country’s economic condition.
 
Some economists are encouraging the government to reduce interest rates in an effort to curb the baht strength. Mrs. Suphin said, “If the reduction of interest rates could help slow down the appreciation of the baht, the measure would be very much welcome. It will also benefit the residential sector as mortgage for home purchases will be less costly for buyers, and also help property developers burdened with borrowings.”