Investors Have Few Worries About Bubble in Bangkok

By Allison Halliday | August 5, 2011

It looks as if the property boom in Bangkok is continuing unabated, with the construction of a new 77 storey tower already underway.

Bangkok is seeing a property boom right now. Image courtesy of Erik Jaeger

The new tower, rising 315 meters, will become the tallest building in Bangkok and is due for completion in 2014. The MahaNakhon was designed by German architect Ole Scheeren to have a somewhat unusual pixilated appearance, and is being constructed by Pace Development. Once completed, the new $640 million tower will house a Ritz Carlton hotel, a shopping center and apartments.

Thailand's GDP grew by a very healthy 7.8% last year, and there are increasing numbers of luxury apartments springing up in desirable areas of Bangkok, in contrast to a decade ago when the region was devastated by the 1997 Asian financial crisis. Nowadays there is a strong demand for residential property due to high consumer confidence and low interest rates, and this has caused a rash of new developments.

There has been a 13.6% increase in registrations of new homes in the capital city, which is the highest level since the previous crisis, and the Bank of Thailand is said to have described last year as being the "golden year for real estate businesses."

The Baiyoke Hotel is set to lose its title as Bangkok's tallest building. Image courtesy of Erik Jaeger

As yet no signs of a bubble have been detected, although concerns have been raised over risk taking in the property sector. Stimulus measures ended in June last year which resulted in slowing demand, prompting some developers to resort to high-risk measures to attract customers. According to the Central bank some subprime homebuyers, or buyers with insufficient funds have been persuaded to purchase property, and this has prompted the bank to make higher loan to value lending more expensive in order to help curtail this risk.

However some people believe there is a risk of a bubble. Property research group, Agency for Real Estate Affairs is concerned about oversupply, as according to its data there are currently more than 135,000 unsold units in Bangkok and its suburbs, which includes developments currently under construction, and another hundred thousand units are expected to come on line next year.

Visit the original news source by Janesara Fugal (AFP) here.