Political stability crucial for property market

ELECTION 2007 / BUSINESS SECTORS ASSESS PROSPECTS

Political stability crucial for property market

KANANA KATHARANGSIPORN

Political stability is key for the country to reinvigorate the overall economy and regain local and foreign confidence to attract investment, say executives in the property industry.

Phanom Kanjanathiemthao, managing director of the property agency Knight Frank Chartered (Thailand), said political stability would likely be a lingering issue no matter whether the People Power Party (PPP) or the Democrat Party form the government.

''It's up to PPP whether it wants to establish the government or not,'' he said. ''In the meantime, it will be very difficult for the Democrats, with about 160 seats, to set up a stable government.''

Problems may escalate, he said, if PPP forms the government and tries to keep some of its more contentious campaign pledges, including amnesty for banned Thai Rak Thai executives, Thaksin Shinawatra's return to Thailand and amendments to the Constitution.

Executives want to see if all sides will accept the new government no matter which party leads the coalition. The political situation should be clearer within three months, and if it improves, sentiment should improve by the end of 2008.

During the past two years, property demand from foreigners has dropped by 50% in Pattaya and 30-40% in Phuket and Hua Hin. Meanwhile, the Samui property market was very quiet due in part to a land-title scandal.

''Foreign buyers and investors in property sector are ready to invest in Thailand as the country's fundamental factors are still attractive,'' Mr Phanom said. ''But now they are sitting on the fence to see the Thai political situation.''

After political stability, foreign investors are most concerned about the Foreign Business Act (FBA) and capital controls. The new government should clear up these issues, he said, as many investors say that both PPP and the Democrats have economic policies that are more friendly to foreign investors than the economic nationalism of the military-appointed government.

''To reduce and prevent any violence, the country's leader for this time should be a negotiator. He should not be talkative or make destructive comments,'' said Mr Phanom.

Teerachon Manomaiphibul, the deputy managing director of Property Perfect Plc, said PPP should be able to set up a new government due to its strong showing, while a coalition of many small parties would be too risky.

The stability of PPP-led government will depend on its focus, he said. If PPP focuses on economic policy, the political situation will be stable. But stability will be threatened if PPP's focus is on political issues. ''Political stability is the major factor. If it is stable, foreigners are ready to come back for investment,'' said Mr Teerachon.

Government spending on megaprojects and infrastructure will be the key factor to revive growth in the property sector as they generate higher employment, investor confidence and economic expansion, he added.