With an unfavourable economy and the property market slowing, developers in southern Thailand must work harder to understand demand, develop better quality products and manage risks prudently, says a senior Bank of Thailand official.
Sureeratana Luckananit, senior director at the central bank’s southern region office, said the global economic recovery would be gradual and likely lower than expected, while the Thai economy depends mainly on tourism and government spending.
“Consumption fluctuates while exports and private investment remain negative,” she said. “Tourism and rubber are the key economic drivers in the southern provinces, so there are opportunities in the property market despite a slowdown but developers need to find them.”
There is demand for housing units priced 3-5 million baht in the South, Ms Sureeratana said. This segment has purchasing power but potential buyers are not confident about spending.
“This segment is ready to buy but there should be attractive packages to lure them,” she said.
The central bank said the property market in the South slowed as fewer construction area permits were issued in the first quarter.
Samma Kitsin, director-general of the Real Estate Information Center (REIC), said developers in key southern provinces adjusted their strategy by slowing new launches. As a result, the absorption rate of low-rise and condo units in key provinces such as Phuket, Phetchaburi, Prachuap Khiri Khan, Surat Thani and Nakhon Si Thammarat picked up in the third quarter of 2015, compared with the same period in 2014.
Songkhla’s economy is not driven by tourism, so the province’s absorption rate for low-rise units and condos dropped, he said.
“Songkhla’s tourism sector relies on Malaysians and Singaporeans,” said Mr Samma.
Issara Boonyoung, managing director of developer Kanda Group Co, said attractive locations were areas along the road between the cities in the five provinces and airports, as land plots in the inner cities are scarce.
The opening of a shopping mall in the provinces is another factor boosting new residential supply and land prices in nearby areas, he said.
Phuket is planning to welcome two large malls next year including Central Festival Phuket Phase 3, with a budget of 20 billion baht and retail space of 300,000 square metres. The Mall Group is developing the Blu Pearl of Phuket with retail space of 650,000 sq m on a 150-rai site with investment of 10 billion baht.
Sitthiporn Suwannasut, chairman of homebuilder PD House Corporation, said the southern market slowed since 2014 after a boom from 2011-13, with purchasing power declining because of lower crop prices.
“Self-built home sales continued well on the Gulf of Thailand side but slowed on the Andaman Sea side,” he said. “In Phuket there is a shortage of land so some buyers have shifted to Phangnga.”
Mr Sitthiporn said self-built home demand in the South is mainly from local buyers. Half of demand in Hua Hin and Cha-am is from foreigners, with 30% Bangkokians.