Bangkok : Twelve condominium projects suspended
BANGKOK SETBACK
Twelve condominium projects suspended
By Somluck Srimalee
February 5, 2009
Developers |run out of money, or fall afoul of municipal requirements
Property developers have suspended work on 12 condominium projects in Bangkok, in some cases because they face financial difficulties in a deteriorating market.
The suspended projects were to provide 209,230 square metres of floor space and were scheduled for construction in 2008 and 2009.
According to a source at the Bangkok Metropolitan Administration (BMA), construction licenses were sought under article 39 (2) of the Building Law for 133 condominium projects in 2007. Of these, 92 are complete, offering 1.3 million square metres of floor space. However, some of them are still waiting for full construction licences and environmental approvals before they can be transferred to customers.
Thirty-six of the projects are still under construction, and five have been suspended. The five suspended projects were to have provided 37,276 square metres of usable living space. The licences for these projects have now expired.
Additionally, five condominium projects out of a total of 23 that applied for full construction licensing after being completed have now been suspended. They were to offer 35,595 square metres of floor space, and their licences have also expired.
Meanwhile, of 156 condominium projects given construction licences under Article 39 (2) in 2008, a further two have been suspended. They were to have offered 138,359 square metres of floor space. Most of the rest are in the process of construction
The BMA source said some condominium projects were suspended because the developers were required to revise them to meet BMA requirements.
Others failed when developers were hit by the deteriorating economic situation.
He said about 70 or 80 residential property projects in Bangkok, many of them complete or nearing completion, are waiting in a queue for Environmental Impact Assessment approval and final approval by the BMA.
Without these approvals, the projects cannot be transferred to the ownership of the home-buyers who made down payments to prebuy them from design drawings. Because the full sales cannot be processed, property developers cannot receive payment and new owners cannot move into their homes.
The source said that, in order to presell city condominiums, developers commonly applied for a construction licence under Article 39 (2) of the Building Law. This allowed them to go ahead with presales and construction.
However, before the residences could be transferred to the new owners, the buildings had to have an Environmental Impact Assessment and also had to meet city regulations in order to receive construction approval from the BMA.
He said home-buyers should be aware that they could be buying units in a property development that was not properly licensed for sale and transfer.
If developers apply for all relevant licences before launching presales and beginning construction, then they can guarantee delivery to their customers, the source said. If, on the other hand, projects are completed without full licensing or Environmental Impact Assessment approval, they may face the need for revision to meet the city's regulations before they can be delivered to customers.
Real Estate Information Centre (REIC) director-general Samma Kitsin said that the number of suspended condominium projects reflected the slump in demand for residential projects. This was exacerbated by the fact that unsold inventory in the property market is now high, and will take two to three years to clear.
According to REIC research, 82,387 units worth Bt205.9 billion remained unsold in the third quarter of last year. Another 30,000 to 40,000 new units will be completed this year.
Out of the 82,387 unsold units in greater Bangkok in the third quarter of last year, 62,325 were in low-rise dwellings including single-family homes, townhouses and duplexes. The remaining 20,062 were condominium units.
Normally, the market can absorb unsold residential stock within one-and-a-half years, Samma said, but now that the economy is reeling from the global recession, it will take twice as long.
"Demand for residences is shrinking, so the supply in the market may take a long time to sell out," he said.
The survey found that 1,126 residential projects that had opened pre-sales and begun construction in the third quarter of last year. These consisted of 244,816 units worth Bt612.04 billion, for an average price of about Bt2.5 million.
Breaking down the total of 1,126 projects, 913 projects with 155,819 units were low rises, with 347 low-rise projects containing 48,479 units located in Bangkok, and 566 projects with 107,340 units situated in the suburbs.
Since the survey, 93,494 of the total 155,819 low-rise units have succeeded in finding buyers, leaving 62,325 units still unclaimed.
The remaining 213 residential projects, offering 88,997 units, were condominiums. Bangkok had 194 condo projects with 69,828 units, and the suburbs were home to 19 condo projects with 19,169 units.
Since the survey, 68,935 of the total 88,997 condo units have been sold, while 20,062 are still waiting for owners.
The market leader in condominium projects in Bangkok and its suburbs is LPN Development, whose managing director Opas Sripayak said demand for city condominiums continued to grow. However, the speed at which projects are sold is slower than last year because home-buyers remain concerned about their future earnings. This has forced developers to turn to smaller projects that will sell quickly, he said.
Opas said some condominium projects that had contributed to the unsold inventory were located far from mass-transit services and could take a long time to sell. His company's new residential projects this year will all be located close to mass-transit systems.
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