Many experienced Thailand property market watchers have been expressing concerns about possible oversupply in the Bangkok condominium market, however real estate firm CBRE has again reiterated its belief that the central business district (CBD) condominium market is in a very different situation to the midtown and suburban condominium market.
The firm noted that there is limited new supply in the core downtown markets of Sukhumvit, Lumpini, Sathorn, Phayathai and the riverside. There are just more than 100,000 completed condominium units in these areas, and a further 26,000 units under construction due to be completed over the next three years. The total existing and new supply in core downtown market accounts for less than 20 percent of the total condominium supply in Bangkok.
There is very little built-but-unsold inventory of developers in completed buildings, the firm reported.
“For example, several years ago the owner of two towers at Millennium Residence was selling the remaining units at a discounted rate. These have all been sold and now we see more buyers than sellers for units in this project,” said Ms. Pornpimol Phuengkhuankhan, Head of Residential Sales Services Ad Hoc of CBRE, Thailand.
This situation is typical in many of the best quality, most sought after condominiums where CBRE sees few units being offered for resale.
Despite the political turmoil in the first half of 2014, there have been record-breaking land transactions in the centre of Bangkok.
For instance, it was reported that publicly-listed Q House paid a price of between THB1.7 million and THB1.8 million per square wah for a 3-rai (4,800 sqm) site on the corner of Sukhumvit Soi 6. It intends to build a luxury condominium.
Rising land prices mean that any new condominium project will be more expensive than past projects, and this push up prices in the best completed buildings.
Bangkok is a complicated market, noted CBRE, and prices for existing condominium projects are not just determined by location. Each building has its own individual market dynamics based on age, quality of design, specification, number of units being offered for sale and popularity among tenants, making the building attractive to buy-to-rent investors. The result is that prices for buildings in similar locations can be very different.
In some locations, CBRE has seen examples of vendors struggling to sell units in a 20-year-old building at more than THB50,000 baht per sqm, while owners of units in more recently completed buildings less than 100 metres away are selling at more than THB130,000 per sqm.
Expatriate rents are also rising for the first time in more than 20 years due to rising numbers of foreigners working in Bangkok. Many foreign tenants want to rent two- and three-bedroom units, and the supply of two- and three-bedroom apartment (single ownership) and condominium (multi-ownership) buildings is not growing.
Only 2 percent of the condominiums under construction in the downtown area will be three-bedroom units, according to data from CBRE.
As rents increase, sale prices for those condominiums most popular with expatriate tenants will also rise especially in an environment where there are low rates of return on other investments. Few banks are offering interest rates better than 2 percent per annum on one-year time deposits, and property offers a better yield together with the possibility of capital appreciation.
Echoing the thoughts of many experienced Thai market observers, James Pitchon, Executive Director of CBRE Thailand, said: “Anyone expecting condominium prices to fall in the downtown area due to the political turmoil is likely to be disappointed, and there is more chance of pricing rising rather than falling.”
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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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