Overall the housing market experienced a slowdown with the exception of the condominium segment. New supply of both single-detached and townhouses declined, while demand was weak throughout the first half of the year. Sales of upscale condominiums, however, improved slightly, while prices continued to rise in most market segments. The changing lifestyle of city dwellers continued to drive the mid-end condominium market along the mass transit routes. This upturn in the midtown condominium market has raised demand for land along mass transit lines, while pushing up land prices in secondary locations such as Ratchada, Ladprao, Tha Pra, Bangkapi and Outer Sukhumvit.

The market for commercial properties such as retail outlets and offices was subdued. Political and economic factors continued to negatively affect the commercial property market. Office and retail rentals remained largely unchanged as business and consumer sentiment remained low throughout the first half of 2007. The hotel industry in Bangkok improved slightly, while hotels in resort destinations continued to outperform their peers in the capital. The continued increase in the number of tourist arrivals in the first half suggested that foreign tourists? confidence still remained at high levels.

Housing - New residential supply in Bangkok dropped 10% q-o-q in Q1 2007 due to the large decline in the number of developer-built housing units. This number increased slightly by 0.3% y-o-y. Future residential supply is expected to drop since the numbers of land allocation and building construction permits dropped significantly recently. The demand for the housing market remains weak with sales rates dropping in almost all areas of Bangkok. Townhouses performed better than SDH (single detached house) as buyers seemed to prefer lower-priced products that are located closer to the city area.

Lower interest rates will continue to be supportive, even though the market is not expected to respond significantly. The delayed construction of new mass transit lines has caused new launches to be delayed and home buyers to put their buying decision on hold. The political uncertainty continues to affect consumer confidence, and lower economic growth is affecting purchasing power.

Condominiums - Sales of upscale condominiums improved slightly in the second quarter, while prices continued to rise in most market segments. Consumer sentiment seemed to improve as we saw more buying activities in both luxury and middle markets.

The condominium market will remain active throughout the rest of the year, especially those projects located in the prime area and those near the mass transit routes. As sales for luxury and upper-middle market started to increase in Q2 2007, the situation for this sub-market further improved in the second half of the year. The ?skytrain generation? and the changing lifestyle of city dwellers will continue to drive mid-end condominium market in the secondary locations. Prices of these condominium projects are likely to increase further as land prices continue to rise.

Serviced Apartments - The supply of serviced apartments increased to over 9,000 units in downtown Bangkok in Q2 2007. Weak demand continued as a result of the ongoing political uncertainty in the second quarter. The average occupancy rate stood at 79.1%. The average achieved rent of grade A serviced apartments increased by 4.3% y-o-y.

The continuing increase in supply has led to a more competitive market, which in turn has resulted in an increase in the number of projects targeting not only expatriates but also tourists. The total supply looks set to reach 10,800 units at year's end. This will further increase competition and could limit increases in occupancy and rental rates unless demand can catch up.

Office - Demand improved slightly in the second quarter, raising the total take-up in the first half of 2007 to 79,000 sq.m. In Q2 2007, the total office supply in Bangkok increased to 7.47 million sq.m. Despite an improvement in overall demand for office space this quarter, net take-up of office space in the first half of 2007 still dropped by 37% y-o-y. The average occupancy rate of offices slightly increased. Despite a slight decrease of grade A rentals in the CBD area on a quarterly basis, overall office rentals in Bangkok continued to rise by about 3.5% y-o-y.

A rebound in take-up will be crucial to this year's performance. The office market looks set to register a lower level of whole-year net new take-up than last year. Average rents will remain mostly flat should demand fail to improve in the second half of the year. The average occupancy rates could drop once the new supply comes on stream at the end of the year. The situation could reverse if the demand comes back.

Market Outlook

The property market in Bangkok is likely to perform moderately towards the end of 2007 as Thailand's economy looks set for a slower growth this year. The housing market is expected to continue slowing, while the condominium market will perform well with prices in the luxury category and mid-end in some locations increasing toward the end of the year. More residential developers are building to target the mid and lower market as the purchasing power of home buyers remains weak. Deeper discounts are anticipated as developers are now trying to reduce their backlog in housing developments. More community malls will be opened to serve growing residential communities along existing transit routes. Offices will face a challenge as about 140,000 sq.m. of new office space is due in the second half of the year.