Some areas of Bangkok are experiencing supply and demand issues on the back of slowing sales, and although demand remains for residential properties there is a mismatch in terms of both product and pricing.
Research undertaken by CBRE Thailand has highlighted the issue, and writing an exclusive column for The Nation Aliwassa Pathnadabutr, Managing Director of the real estate agency, noted that what developers want to achieve is their target price and an optimum sales rate, but she posed the question whether this is actually what consumers want?
She said: “In downtown areas [of Bangkok] where prices of new high-rise condominiums have risen above THB150,000 -200,000 per sqm, developers have either reduced unit sizes or lowered specifications and material finishes of the properties to make the unit price affordable.
“But by reducing unit sizes further, affordable units have become too small to create a quality living environment.”
CBRE’s research discovered that at the high-end of the market, buyers are still searching for a reasonably large space – with two-bedroom types being the most popular. Growing demand for three-bedroom units was also noted.
“In many cases buyers are prepared to pay higher prices for products that meet their requirements in terms of quality and design,” said Aliwassa.
“What is happening in the lower and middle-income markets in midtown and suburban locations is even worse, with most products developed with the financial affordability of the buyers as the sole consideration.
“Attractive financial packages with low down payments are what buyers will consider, thus most of the projects have ended up offering the same product – with the majority being one-bedroom units as small as 24-30 sqm.”
She added that there is a real demand for larger one-bedroom and two-bedroom unit types.
“There are opportunities to fill the gap and develop product that meets the market needs, but few developers are able to do so given the current cost of land and construction.
“In both high-end and in the mid-end markets, end-user buyers who want more spacious units have started looking for other alternatives, which include older buildings that typically offer larger unit sizes. However, we found out that the volume of sales in older buildings is still limited.
“Buyers do not like to accept the generally poor condition of the units or their buildings. Poor building management and lack of renovation of common areas are among the most common reasons cited regarding the illiquidity of these old properties, despite the fact that their price per sqm is much lower than that of new buildings.”
She added that in the midtown areas of Bangkok, such as late Sukhumvit or in other suburban locations, the lack of marketing and sales channels makes the old properties even more unmarketable.
“We cannot just sell properties by placing them on the Internet or traditional newspaper adverts. A physical inspection is still required and, in most cases, sales in existing buildings are carried out by property agents. Even though there are more than 100 property agencies in the market, most of them focus on saleable new buildings in good locations, leaving the old properties unmarketable.”
CBRE does not expect a big surge in the resale of older properties as there is no real mechanism to expedite the transactions.
“Sales of older properties will continue to be slow and, because of the financial factors which dictate new projects, I believe that the mismatch between buyers’ space requirements and the products being offered will continue until the market has consolidated and the new cycle begins,” Aliwassa concluded.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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