Building sites feel the heat

Construction News

Bangkok has no shortage of doomsayers warning that the present construction boom could go bust if the explosive growth of condominiums, townhouses and even single homes does not slow. Their negativity is countered by banks, property developers and contractors who insist that the pace of construction merely meets demand and there is no danger of a property asset bubble in the near future. They have backed these assurances with major capital investments but, in many instances, the scope of these projects has been downsized to cater to a less affluent market. Condo units are getting smaller and costs proportionately lower. Although the ghosts of 1997 continue to haunt us, times have changed and today’s interconnected world is very different, so risk assessments vary accordingly.

The recession and poor economic health of the United States and other Western nations together with home-grown political instability, a recovering economy, the strong baht and the ever-present fear of civil unrest have taken their toll of potential foreign buyers of high-end condos, once the principal target market. This slack is now being taken up by construction of mid-level units. If basic laws of domestic supply and demand are followed, the risk of any bubble being created is minimal, especially in the wake of the Bank of Thailand’s new measure tightening mortgages by capping loan-to-value ratios at 90% for condominiums and 95% for single houses and townhouses. But caution and prudent planning will be necessary to prevent Hong Kong-style speculation, instability or overheating in the long term.

The building sector remains a strong growth industry. Just how strong was demonstrated this week by a property consulting firm which estimated that 107,508 units from 398 projects worth 278.9 billion baht will have been launched by the end of this year _ an 87% rise in units and 53% growth in value from the 57,604 units worth 183 billion baht launched last year.

Of the total new units, 55% are condominiums, 26% are townhouses, 14% single houses and the rest are other types of development. In terms of price, 57% of new offerings are priced below 2 million baht each while those priced above 5 million baht account for around 10%. Next year should see a slowing of this pace as investors realise the need to be more cautious and caring. Sadly, some contractors with the job of turning these statistics into actual structures care only for profits, and little for the communities they invade.

There is nothing unusual about the continuing rush to build soaring condos or new office blocks in a city as busy and sprawling as ours. What is unusual is the lack of proper zoning and adherence to a comprehensive and detailed city plan that is evident in so many of the new projects launched and those already under way. Some areas are becoming massively overdeveloped with a chronic shortage of infrastructure.

This is a disappointment because Bangkok‘s city plan, adopted 6 years ago, was supposed to put an end to the chaos that some contractors cause when they move into an existing community and selfishly set about destroying the quality of life of existing residents by subjecting them to years of noise, dust and vibration.

In an age where public relations has been elevated to an art form, there is no excuse for such behaviour. Indeed, not all developers and contractors are as selfish. A few go to extremes to maintain good community relations. They do this because they know that working with communities is better than ignoring them. Unfortunately not all builders are as public-spirited.


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