Thailand's economic outlook remains muted as many factors continue to affect the growth rate. In particular, exports have decreased from the previous year despite a slight pick-up in September. Foreign tourist arrivals for the first nine months were down 10% and tourism revenue fell 7.5% from a year earlier. The recovery expected following the May 22 coup has yet to take hold and the property sector, including the Bangkok condominium market, is seeing some impact.
ON TRACK: Most condominium projects launched in the third quarter and located along existing BTS and MRT lines had high take-up rates.
Many condominium developments were postponed from the fourth quarter of last year because of political demonstrations, and more postponements were announced in the second quarter of this year because of uncertainty in the immediate aftermath of the coup.
The number of condominium units launched in the capital in the third quarter of 2014 totalled 11,707, a decline of nearly 8% from the same quarter of last year. Launches in the first nine months of the year totalled 34,542, a decline of 13% from the same period last year. With only about 5,000 units in the pipeline from listed developers for the fourth quarter, in addition to projects from non-listed developers, the total for the year may no be much higher than 40,000 compared with 51,151 last year.
Most of the launches in the third quarter were in July and August, while activity in September slowed as developers saw that buyer response was weak. However, some condominiums offered by well-known listed developers sold out or had high take-up rates within a few days of their official launch.
Supply: A total of 3,159 new condominium units were completed and registered at the Department of Land in the third quarter this year, bringing the total existing supply for the whole of Bangkok to 417,650 units.
More than 60,000 units are scheduled to be completed in Bangkok in the last quarter, but construction delays stemming from a lack of workers could reduce that figure by as much as 70%. In addition, low take-up rates have affected construction progress, especially for small developers that have limited budgets and are waiting for project financing.
Demand: Household debt and the weak economy continue to influence decision-making by people thinking of making big-ticket purchases. Most Thais are still waiting for a clear direction on public development and economic policy.
The average take-up rate for all newly launched condominium units in the second quarter of this year was 64%, a significant increase from the first quarter, but it fell to 59% in the third quarter. Some projects from listed developers still had a high take-up rate in the third quarter, reflecting the fact that they are still more trusted by buyers.
Most condominium projects launched in the third quarter and located along existing BTS and MRT lines had high take-up rates or sold out within a short time after the official launch. Only around 50% of all condominiums sold are located away from existing BTS and MRT lines.
Demand in the fourth quarter is expected to increase by 5-10%, especially for projects from well-known developers that are scheduled to be launched before the year ends.
Price: The average price of all new units launched in the second and third quarters increased in each quarter. This shows that the market is improving slightly after the market slowdown from the fourth quarter of 2013 to the second quarter of 2014.
The average price of new units launched in the third quarter was 91,600 baht per square metre, a rise of 20% from the previous quarter. However, the big increase partly reflects the launch of many high-end and luxury condominiums with an average price of 100,000 baht/square metre or more.
The average selling price of newly launched projects in the core city area is the highest at more than 160,000 baht/square metre. The average in the suburbs is approximately 75,000 baht/square metre, an increase of around 20% from the previous quarter.
The steady increase in the prices of new condominiums is leading more buyers to look for second-hand units because the latter offer lower prices in the same locations as new buildings.
Most condominium units launched in the third quarter this year were priced in the range of 60,001-80,000 baht/square metre, while most units launched in the second quarter were priced between 40,001 and 60,000 baht/square metre.
Of the new units launched in the third quarter, 62% were in the Bangkok suburbs. Some projects far from existing BTS lines are starting at more than 120,000 baht/square metre, due to their location on the riverbank.
The average selling price of units in buildings located between 501 and 1,000 metres from BTS or MRT stations was the highest in the third quarter, at 115,500 baht/square metre.
Forecast: The approval by the military government of some new mass-transit lines, on which work is expected to start next year, will be positive for the condominium market, as many developers are looking for good new locations.
The average price of completed units will probably increase by 3-5% in the last quarter of 2014 and in 2015. A 10% increase is expected for new units scheduled to be launched in the fourth quarter of this year.
Listed developers are still the main players in the market, especially in Bangkok and some tourist destinations, as well as major cities around Thailand. More than 60% of the overall market is from a few listed developers. Some big-name residential developers have merged or are forming joint ventures with other big-name or smaller companies or foreign investors.
The middle- to low-income bracket is still the main target group of all developers, but most projects will be located in the Bangkok suburbs, especially along the new mass-transit extension lines. n
Surachet Kongcheep is an associate director of Colliers International Thailand. He can be reached at surachet.kongcheep@colliers.com.