The property market in Bangkok began to bounce back in the third quarter of 2014 as the new government settled in following the May 22 military coup and mass-transit development projects were restarted. Business and consumer confidence was markedly higher than in the first six months of the year, especially in the property market, as more buyers visited the sales offices of condominiums and housing estates. Launches picked up further, especially for condominium projects, in the fourth quarter, with both large and small developers active.
The condominium segment is the easiest to measure in terms of popularity in the residential market; it is also the most sensitive to various factors. Thus, property experts and government officials tend to monitor this segment more closely than others. Although the Bangkok condominium market performed below expectations in the first three quarters of 2014 because of the impact of political tensions, it recovered in terms of supply in the last quarter.
A total of 15,563 condominium units were launched in the fourth quarter, making it the most active quarter of the year (see table). The total for all of 2014 ended up at 50,105, only 2% lower than in 2013, confounding the experts who expected launches would decline by about 20%.
About 8,600 condominium units or 55% of those newly launched in the fourth quarter are located in areas outside the existing BTS and MRT lines. Some projects are rising along new routes under development, such as the Blue and Purple lines, and some are along lines for which bids for construction are scheduled to be called this year.
Fifty-seven per cent of all condominium units launched in the fourth quarter have been sold. The sales rate reached 90% for new units in the city centre, where good locations are becoming scarcer and prices are rising. The average selling price for all condominiums launched in the fourth quarter was 84,500 baht per square metre, a decrease of 8% from the previous quarter. The average price in the city centre was 218,700 baht per sq m, because all of the projects are aimed at the luxury market and situated in prime locations. Even though some city centre projects are located far from a BTS or MRT station, they are still considered among the best locations in Bangkok.
The average selling price in the suburban Bangkok area is still lower than in other locations because most developments are in areas that are far from existing skytrain and subway stations. However, some projects are located in areas along new extension lines that are planned for development in 2015.
The increase of land prices in the city centre is the main factor pushing up average selling prices in the heart of the capital. This is starting to have a ripple effect on the city periphery and suburban areas. This is because most buyers in Bangkok are still looking for units priced below five million baht a unit, so developers need to find new locations where they can serve this income bracket. Consequently, competition for good plots could push up land prices across the capital region.
Average selling prices of some new condominiums scheduled to be launched this year in the city centre are expected to be higher than 230,000 baht per sq m, with the top developments commanding 350,000 baht or more, as land prices continue to soar. Some prime plots now cost as much as 1.8 million baht per square wah.
The continuing expansion of mass-transit systems will be the main factor spurring the condominium market, mainly at the high and low ends. Many developers have already acquired land and are preparing to announce projects this year. It’s also worth noting that some areas along the new mass-transit lines are expected to see more office and retail projects as well as residential development.
Retail property developers have had some hits and misses with community malls in suburban Bangkok over the past three years. They have realised that they need to be in strong residential communities, so they may gravitate to the same locations that residential developers are interested in. Convenience stores will continue to dominate in 2015 because they can be developed quickly and at multiple locations.
Large numbers of international and Thai brands are still interested in the Thailand market and are looking to open new stores or increase the number of existing outlets in the country, especially in Bangkok and top tourist destinations. However, Thai buyers as opposed to tourists remain the main target of all retail operators, although local consumers’ purchasing power has been weak in light of high household debt levels. However, purchasing power in 2015 may be higher than in 2014 because the country’s overall economic performance is expected to be better than in the previous year.
While the coming year will be a better one for the property market, it will not be a golden year by any means as some factors continue to affect the confidence of Thai and foreign buyers. The number of newly launched condominium units in Bangkok is again expected to be between 50,000 and 55,000, and much will depend on the demand in the first half of 2015.
Developers are carefully monitoring the condominium market with their in-house research teams, so they can adjust or change their plans every quarter depending on conditions. The Bangkok condominium market still has room for future growth, with the biggest and best-financed developers in the best position to identify the opportunities and capitalise on them. n
Surachet Kongcheep is an associate director of Colliers International Thailand. He can be reached at surachet.kongcheep@colliers.com.