With consumers feeling gloomy over the outlook of post-coup Thailand, the kingdom's nearly US$6 billion housing market has shrunk for the first time since 2000, industry experts say.
"People are delaying buying property due to a lack of confidence in the economy and politics," said Atip Bijanonda, president of the Thai Condominium Association.
Sales in the residential property market, worth 200 billion baht (US$5.8 billion), dropped by 10 billion baht in the four months to last month, marking the first decline since 2000, the association said.
PHOTO: AFP
The figure has rattled the industry, which saw demand nosediving during the 1997 Asian financial crisis.
Atip said he expected more bad news with Thai consumer confidence stuck at a five-year low.
"The market may have negative growth this year," he said.
To shore up housing demand, the military-installed government, which came to power after a coup last September, is expected to launch measures aimed at reviving the property sector, including tax cuts.
Pimonwan Mahujchariyavong, a property analyst at Kasikorn Research Center, said consumers were putting off buying property as they awaited a further cut in the key interest rate.
"Consumers are expecting gains from falling interest rates and they are waiting for the rate to go down further," Pimonwan said.
The Bank of Thailand slashed its key interest rate by a half-point to 3.5 percent last week in a bid to spur sluggish consumer spending and the slowing economy.
It was the fourth rate cut this year but business leaders called on the central bank to lower the rate more aggressively in an effort to stimulate the economy, which is seen rising 3.8 to 4.8 percent this year.
If growth was just 3.8 percent this year, it would mark the lowest increase since 2001, when Thailand's GDP expanded 2.2 percent.
With flagging finances and political uncertainty under the military government, the number of new housing projects has fallen as some 90,000 houses and condos remain unsold in the market, Pimonwan said.
"The property market has slumped significantly since the beginning of this year because of shrinking confidence in the economy among developers as well as consumers," she said.
Longlom Bunnag, chairman of real estate management firm Jones Lang LaSalle Thailand, agreed.
"The slow growth of demand that the market is experiencing now is largely due to a lack of consumer and investor confidence rather than a decline in spending power," he said in a statement.
But Longlom said anticipated elections will likely see sales pick up later this year.
"We expect demand to recover in late 2007 or early 2008, once the political uncertainty is clear following the new election scheduled for December this year," he said.
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