By Andrew Batt:
High land prices in Bangkok’s prime property areas will restrict the number of new developments in the Thai capital.
To mark the 25th anniversary of its debut in Thailand, property consultancy CBRE released its predictions for property markets in the kingdom.
It noted that high land prices – above THB1.5 million per sq wah – will affect the feasibility of condominium projects in prime areas such as Lumpini, Rajadamri, Ploenchit, Wireless Road, Langsuan and lower Sukhumvit. It said the condominium market will become more complicated and competitive.
In secondary locations within the central business district and sub-sois, developers need to be more cautious in terms of new launching new projects as higher land prices and construction costs will drive up prices over the market affordability, the consultancy noted.
Prime downtown areas pf Bangkok have drawn continued interest from foreign buyers, particularly Asian buyers from Hong Kong/China, Singapore, Taiwan and Japan. They consider Bangkok both attractive and affordable for second residences. CBRE expects the downtown market to be a healthy, low volume and high value market with the clearance of built unsold inventory and a limited number of new launches.
It said that market prices have dramatically shifted over the past two decades – from THB35,000 per sqm at Somkid Gardens which was one of Bangkok’s first condominium developments, to prices in excess of THB250,000 per sqm today.
Whilst each price barrier seemed impossible to achieve at the time, barriers such as THB100,000, THB200,000 and THB300,000 per sqm, have all been broken. In the next decade, prices will continue to rise on the back of limited freehold supply and increased buyers’ affluence demand for prime central business district locations, CBRE predicted.
The report said: The Sukhumvit area has shown the highest price appreciation in recent years and no one would have predicted prices of THB200,000 per sqm just 18 months ago. With continued redevelopment including the sky train and new major retail and office developments, Sukhuvmit is becoming the prime location, albeit at a discount to Central Lumpini prices.
“The midtown market has the biggest challenge in terms of supply volume and distortions in the percentage of one-bedroom and studio properties, yet it remains the only purchase opportunity closest to the central business district for young middle-level executives and white collar employees.
“Developers in this segment should be cautious about the potential for saturated demand in certain locations, particularly for first-time developers. In our view, there is an imbalance in the midtown market that will need to be corrected.”
CBRE believes that the Bangkok condominium market is set to grow further and will encroach on the suburbs. The midtown market will face a situation where a small condominium unit with proximity to a mass transit station will be more expensive than a townhouse in the same general area and growing competition for midtown and emerging suburban locations with lower prices. This conflict will be resolved with sizing and market pricing and will require in-depth market study to ensure feasibility.
At present, the midtown market is not a market for short-term speculators as the re-sale market will be less liquid.
Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email andrew@allproperty.com.sg
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