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News Release

Bangkok

Political Stability Needed to Pave Way for Faster Recovery of Property Sector

New government urged to foster reconciliation


Whilst demand for real estate is tied tightly with the domestic and global economic situations, no one can deny that the case of Thailand is exceptional. The Thai property sector has suffered slow growth in demand following the political uncertainty that the country has endured over the past years. Jones Lang LaSalle is hoping that the next government will succeed in bringing the six-year political conflict to an end, allowing for a faster recovery of the real estate sector.
 
Mrs. Suphin Mechuchep, Managing Director of Jones Lang LaSalle, said, 'It is clear that confidence in Thailand’s real estate market relies a lot on the country's political situation. The recovery of the real estate market, which has been slower than expected despite the strong economic growth witnessed in 2010, exemplifies the case. With market fundamentals remaining strong, we expect real estate demand to grow rapidly should the next government be able to restore political stability.'
 
Suphin Mechuchep: New government must foster reconciliation
 
 
Demand for offices in Bangkok likely to jump
 
Since 2007, Thailand’s economic growth and demand for office space have slowed down. The country’s GDP grew 4.8% in 2007 and 2.5% in 2008, and saw a contraction by –2.2% in 2009. Demand for office space over the same period was on the same track, with the net take-up levels between 2007 and 2009 averaging slightly over 55,000 sqm per annum.
 
In 2010, Thailand’s GDP grew by almost 8%. That same year, demand for office space in Bangkok improved significantly, reaching 110,000 sqm. However, this total remained far lower than the pre-political conflict period.  Between 2000 and 2006 the country witnessed a lower economic growth rate 2010 but the office market enjoyed an average annual take-up rate of over 250,000 sqm.
 
With the absence of political unrests over the past 12 months, the net take-up of office space in Bangkok in the first half of 2011 totalled more than 107,000 sqm.
 
'Provided that the next government succeeds in eliminating the political conflict in the country, it is likely that demand in the Bangkok office market will recover to the pre-political conflict level,' said Mrs. Suphin. 'Political stability will allow the Thai economy to grow faster, restore confidence and encourage expansions of both local and multinational companies. All these will translate into demand for offices,' she explained.
 
Awaiting the return of foreign buyers
 
Relying heavily on demand from foreign buyers, the high-end residential markets in Bangkok, Phuket and Pattaya have been negatively affected by the unstable political situation in the country, dampened by the escalation of the global financial crisis in late-2008.
 
Over the past 12 months, sentiment in these markets has started to pick up as the global economy recovered from the financial crisis and the political situation cooled down. Whilst some foreign buyers have come back in the high-end residential markets in Bangkok, Phuket and Pattaya, many continue to adopt a wait-and-see attitude for the time being.
 
'We continue to receive enquiries from foreigners who are interested in buying holiday/retirement homes in Bangkok, Phuket and Pattaya. Therefore, we anticipate demand from foreign buyers in these markets to bounce back quickly once there is a clear sign of political stability,' said Mrs. Suphin.
 
Looking forward
 
'We are hopeful that the first priority from the new government being formed is to bring back peace to Thailand. The government must foster reconciliation as promised in order to satisfy all parties and bring the nationwide political conflict to an end. We can then expect the onset of political stability which will help boost confidence in all sectors including real estate,' Mrs. Suphin concluded.