Ultra-luxury condominiums in central Bangkok are growing strongly, according to new research from JLL focusing on the first three months of this year, although the real estate firm also noted how more buyers are considering buying and investing in older, more affordable developments.
Four new ultra-luxury projects were launched during Q1 totally 975 units. JLL said this shows continued confidence from developers that demand remains in the luxury market in Bangkok.
According to research from JLL’s Thailand Property Intelligence Centre, there were four new high-end condominium projects launched in Bangkok during the first quarter of 2015 totaling 975 units. Just one is for sale on a leasehold basis while prices at all four developments exceeded THB250,000 per sqm. While two projects – The Diplomat 39 and Nimit Langsuan – reported sales rates of 70 percent and 80 percent respectively, the average reported sales rates of all four was 46.2 percent as of the end of March.
Rising land prices pushing up new condominium development costs
Suphin Mechuchep, Managing Director of JLL, said: “Selling prices of luxury condominiums in Bangkok, particularly in key central business areas with easy access to the mass-transit BTS or MRT stations, have continued to grow and will grow further, due mainly to rising development costs.
“While construction costs have stayed relatively stable thanks to lower oil prices that have allowed for a reduction in costs of certain construction materials, rising land cost has now become a significant part of the development costs in prime locations.
“Generally, land cost represents 15 percent of the total development cost of a condominium project. Nowadays it accounts for 25 percent for a condominium development in prime locations. With growing scarcity of prime land for new development, selling prices in future luxury condominium projects are likely to rise further.
“For this reason, there remain a lot of people who want to buy luxury condominiums in prime locations with a hope for a capital gain in a long term. Having said that there are more and more questions about to what limit buyers would remain willing to accept the rising prices,” added Suphin.
Buyers show stronger interest in more affordable units in older developments
Bunthoon Damrongrak, Head of Residential Sales and Leasing at JLL, said “Demand for luxury condominiums has continued as reflected by strong sales rates in a number of newly launched projects. However, higher selling prices in these projects are encouraging more condominium buyers to look for more affordable units in older buildings.”
Recent condominium sales transactions concluded by JLL show condominium units in older buildings are typically 20-30 percent cheaper than newly launched projects located in the same area.
“We have received more enquiries from buyers looking for units in older buildings. Most of them are looking to purchase used or backlogged units for own use. Some of them are also buying used units to put them up for rent”, said Bunthoon.
“However, as newer buildings attract tenants better, purchases of used units in older buildings as an investment are limited to buildings that occupy an exceptionally prime location, preferably with easy access to a BTS station where leasing demand is strong.
“Whether it be for own use or as an investment, buyers tend to choose units in buildings that are well managed and maintained to look like new,” he concluded.
