The Thailand Real Estate report examines the Commercial Office, Retail, Industrial and Construction segments in the context of a subdued economy whose commercial real estate market is currently characterised by its reconstruction bent.
With a focus on the principal cities of Bangkok, Rayong and Pattaya the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of global economic woes upon the sector. The key potential growth areas driven by increasing activity reconstruction damage caused by the 2011 floods are also explored alongside newly collected data covering rents and yields for the first six months of 2012.
Concerns remain prominent among investors. However, Chinese corporate interest in the Thai real estate sector is coming to the surface. Following a recent business match-making roadshow to China, a number of Chinese firms have shown an interest in international collaboration. Thailand's stock as an investment destination among Chinese firms is rising, and the local Thai real estate sector is one industry which has been highlighted as an area of growing overseas interest.
- Reconstruction efforts contributed significantly to a strong rebound from an 8.9% year-on-year (y-o-y) contraction in real GDP growth in Q411 to 0.3% y-o-y growth in Q112. However, we view these as one-off effects that will wear off over the coming months. Moreover, given that we do not see the case for a strong pickup in external demand, we expect real GDP growth to remain subdued at 4.0% for 2012, below average consensus forecasts of 5.1%.
- Inflationary pressure is expected to continue to wane, and the central bank will very likely begin to tone down its rhetoric on inflationary risks resulting from higher food and fuel prices. We believe that policymakers will need to see either further evidence that the economic recovery is losing momentum (which is our core view) or a greater slowdown in money supply growth before there is another rate cut. Accordingly, we are maintaining our forecast for one 25 basispoint cut by the end of the year.
- Thailand's fiscal position is set to deteriorate in the near term in line with our view that the government will increase public spending to help cushion the impact of cooling external demand on economic growth. However, a significant portion of the expected increase in public spending will go to one-off reconstruction efforts and flood relief programmes. We therefore believe that there is significant room for the government to reduce spending from 2013 onwards. We remain optimistic that Thailand's fiscal position will gradually improve and achieve fiscal balance by 2016.
- Major Forecast Changes: We estimate a widening of the budget deficit from 1.5% of GDP in 2011 to 2.5% in 2012 in light of an expected surge in public spending.
- Downside Growth Risks From Rising Commodity Prices: Should commodity prices resume an upward trend through 2012, we could see the central bank adopting a more hawkish stance on monetary policy. Higher interest rates, combined with a stronger Thai baht, would put considerable downside pressure on economic growth.
- Upside Long-Term Growth Risks From Political Reconciliation: Political uncertainties have resulted in depressed foreign direct investment in the economy. However, reconciliation efforts and economic reforms to distribute wealth more equally among the population could eventually help to bridge the political divide in Thailand. This would provide a significant boost to investor sentiment and pave the way for a surge in foreign direct investment inflows and robust economic growth - Construction: We continue to expect a modest recovery for Thailand's construction sector in 2012, with the underlying assumptions for a recovery (such as the implementation of flood prevention measures, robust building construction activity and conducive monetary conditions for construction) still holding firm.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
Click for Report details:Thailand Real Estate Report Q4 2012