As Thailand’s real estate sector readies for a slowdown over the next six to 12 months, property consultants Jones Lang Lasalle have dismissed fears that the decline will be on a par with that witnessed post-1997. According to Suphin Mechuchep, managing director of Jones Lang Lasalle (Thailand), real estate prices will come under pressure during 2009, but the impact will be moderate in comparison with the period following the 1997 Asian financial crisis. Suphin highlighted that the 1997 crisis was a crisis of Thai financial institutions, forcing developers to sell projects cheaply because their investment relied on project finance. "Developers’ debt-to-equity ratio was very high as their investment leveraged at only 20-30 percent, compared with the current 50-60 percent," she said. "With no forced sales, prices will not collapse but just weaken to the initial selling prices during the launch period." Condominium prices in particular are likely to be weakened, however, as a significant level of new supply is due to completed in 2009. Units taken by speculators would also compete with new supplies offered at competitive prices as construction costs fell. "But this will not mean a loss [for speculators]. It will be just a lower margin than expected or a loss in profit," she said. "Some buyers will turn from speculators into investors, holding units for longer periods to avoid lower margins." In this context a number of developers, including Goldenland, have turned their backs on residential development to focus instead on commercial property. New supply of Grade A office space is currently very limited and vacancy rates have been consistently low for the past 24 months. As the world economy slides deeper into recession, however, demand for office space will decline and office rents in the Thai capital could decrease by 5-10 percent on average, said Suphin. "Unless monthly rents reach Bt1,000 psm, investing in a new office development will not be as attractive as other sectors, except for development for own use," she said. Suphin has joined calls for the Government to stimulate the property market by extending the leasehold period for foreign owners from 30 to 90 years, but , at the time of going to press, the new administration was yet to pronounce an opinion on this strategy.