Fog or Smog?

While there is ongoing debate about whether the hazy Bangkok skyline is just a blip on the radar or Bangkokians need to get used to wearing N95 masks, the future of Bangkok property market has also become overcast with significant changes approaching.

The country’s first elections in eight years will take place on 24th March, 2019. Not only will this help improve foreign investors’ sentiment, but we will also be seeing new policies that each party will be promoting applicable to the property market. Whoever emerges as the winner will have an impact on the economy and the progress of infrastructure projects across Thailand in terms of continuity and direction; yet, the impact is expected to be short-term.

The tighter mortgage regulation for second homes will come into effect on 1st April 2019 and it will directly hit the condominium market, especially speculative buyers. The regulation may cool down the residential market and put more focus on real demand from end-users. This will prompt developers to turn to foreign buyers who use their own funds to purchase condominium units. However, the focus on foreign buyers comes with some uncertainty from external factors and questions on the sustainability of the market.

The new Land and Property Tax, coming into effect on 1st January, 2020 aims to increase effectiveness of land use, reduce inequality, and make taxation more defined with the new structure. This will put more pressure on companies with land banks to put them to use or release them back to the market. To make the new tax structure clearer, it also needs a solid and defined criterion for what is considered as vacant land, along with land used for agricultural or commercial purposes.

The new Bangkok City Plan, aiming to create smarter growth and drive Bangkok towards becoming a more outward-looking city, is expected to be implemented in early 2020. We have yet to see what changes will be made to zoning as it is in the planning stage. Increasing Floor-Area-Ratio (FAR) across the board will not induce smarter growth, but thoughtful changes like reducing parking requirements or incentivizing new city nodes to be built in outer areas will change the market. Many developers are holding back to see what changes will be made to the City Plan before strategizing for their new developments.

Significant changes in the property market will not be derived solely from new regulations and policies, but also from waves of large-scale mixed-use developments across Bangkok which will bring massive amount of new supply in every sector into the market. Major mixed-use projects still under construction like Samyan Mitrtown, The Parq, One Bangkok, Dusit Central Park, Sindhorn Village, and Whizdom 101 will bring millions of square metres of salable and leasable space into the market. Whether these will fuel or flood the market depends on when they will be completed.

By Rathawat Kuvijitrsuwan, Research and Consulting, CBRE Thailand.