Bangkok property boom rises above bubble fears

BANGKOK—A 77-story skyscraper is set to become the latest, and tallest, addition to Bangkok’s ever-changing skyline, already transformed by a construction boom that has raised fears of a property bubble.

Variously described on Internet forums as looking “like it has been eaten by giant termites” and reflecting “the chaos of Bangkok,” the MahaNakorn – Great Metropolis – will tower over the Thai capital when it is finished in 2014.

At 314 meters (1,036 feet) it will be the city’s tallest building, but size was not what mattered, said Sorapoj Techakraisri, head of PACE Development, which began building the skyscraper in June.

“I just wanted something unique, something interesting,” he told AFP.

MahaNakorn’s unusual pixelated spiral design was created by German architect Ole Scheeren, who was behind Beijing’s futuristic China Central Television headquarters.

The 19 billion baht ($640 million) tower will house apartments, a shopping center and a Ritz-Carlton hotel.

“When the economy gets better, the buildings go higher,” Sorapoj said.

Thailand’s economic health appears robust, growing 7.8 percent in 2010 despite street protests by the opposition “Red Shirts” that brought large areas of Bangkok to a standstill for two months.

An ever-increasing number of pristine new apartment blocks jostle for space in desirable areas, vying for custom as billboards written in idiosyncratic English promise swanky lifestyles.

It is a far cry from a decade ago, when the city was littered with the skeletal remains of abandoned tower blocks, casualties of the 1997 Asian financial crisis that devastated the region.

The Bank of Thailand has described 2010 as the “golden year for real estate businesses,” with strong demand for homes – driven by low interest rates and increased consumer confidence – causing a flurry of new buildings.

This resulted in a 13.6 percent increase in registrations of new homes in Bangkok to the highest level since the 1997 crisis, according to the bank’s 2010 annual report.

The bank said it would be “vigilant” for signs of a bubble – which it defined as a “sharp” increase in asset prices combined with strong growth in home loans. A bubble could then burst if demand drops off and there is a glut of available properties.

Central bankers did not detect a bubble building, but raised concern over risk-taking in the sector.

As demand slowed after the June 2010 expiry of stimulus measures – such as two-year interest-free home loans for first-time buyers – developers increasingly resorted to high-risk strategies in their fight to fill properties.

Homebuyers with “insufficient purchasing power or subprime customers” were persuaded to buy, the bank said, while lenders also boosted the number of loans at 90 percent or more of the property value.

To help “maintain economic stability,” the bank responded by making some high loan-to-value lending more expensive for financial institutions.

Property research group Agency for Real Estate Affairs (AREA) said it had detected a build-up in oversupply and warned that the level would become unsustainable.

Its figures show there were more than 135,000 unsold property units in Bangkok and its suburbs as of July 2011, including projects under construction. Another 100,000 units are expected to come in to the market next year.

AREA president Sopon Pornchokchai said he could foresee an “upcoming bubble.”

“If something happened to our economy or politics, it could cause the bubble to burst,” he said.

But Kobsidthi Silpachai, head of markets and economic research at Kasikorn Bank, said Thailand’s economic health meant it was in a better position than in 1997, adding that if a bubble did burst its impact would be limited.

“If it did really happen it would certainly affect industries related to real estate, like steel and cement, but it would not affect other businesses,” he said.

Developer Sorapoj shrugged off jitters over the health of the real estate sector, although he conceded that the Red Shirt protests had hurt interest from foreign investors.

He was confident Thailand’s incoming leadership – which is affiliated to the Red Shirts and won a thumping majority in the July 3 election – would be able to avert any threats.

“I’m not worried about oversupply. The new government will do whatever it takes to prevent bubbles,” he said.