Launches of new condominiums slowed in Bangkok last year due to the growing scarcity of land for development in areas where demand is strong, while flooding late in the year also curtailed most activity in the property market.

In the first half of this year, 1,898 condominium units were launched in the central metropolitan area, while another 1,500 are expected in the second half. This limited new supply, coupled with strong demand, will push up the selling prices of condominiums in the city area, as defined below.

Already we are seeing prices as high as 170,000 baht per square metre for good quality leasehold units in the highly desirable central Lumpini area. This is about the same as a freehold condo in the Sukhumvit area, whereas in central Lumpini freehold units can cost 220,000 baht per sq m or more. The table shows where the new city condominium launches are expected to take place in the second half of 2012.

Looking at the wider residential and condominium market, we can divide the capital into three broad areas as follows:

CITY

This includes the central and surrounding areas that have traditionally been popular with affluent Thais and expats. The main focus of attention for developers and condo buyers is Sukhumvit from sois 2-42 on the south side and 1-63 on the north and Rama III and the area along the Chao Phraya River.CITY FRINGES These are areas a little further out but with easy access to the city centre via the BTS and MRT mass-transit systems. These include the Ratchada-Lat Phrao areas and Phahon Yothin from sois 1-14.

BANGKOK PERIPHERY 

These are areas not included in conventional residential property surveys in the past, but which are now benefiting from new transit routes. They include "late Sukhumvit", from Soi 63 eastward to the Bang Na intersection; Thon Buri, focusing on neighbourhoods around the new BTS stations built or planned west of the Chao Phraya; and other up-and-coming areas for condominium development such as Chaeng Watthana, Kaset-Navamin, Srinakarin and Phetkasem.

Looking at the overall picture, the cumulative supply of Bangkok condominium units totalled 202,391 units as of the end of June 2012, an increase of 15.5% from 175,307 at the end of 2011. A total of 27,084 units were offered in condominiums launched during the first half of this year. The majority of the new launches, 72%, were in the Bangkok peripheral areas, compared with 21% in the city fringes and 7% in the city.

Demand for condominiums slowed in 2011, again partly because of the economic impact of the floods, with total take-up of 20,560 units for the full year. In the first half of this year, take-up reached 16,810 units, increasing by 12.8% from the same period last year.

The majority of demand during the first half of this year was for condominiums located in the Bangkok peripheral areas, especially in the north along Chaeng Watthana, where 4,133 units were bought out of a total of 5,406 new launches, representing a take-up rate of 76.5%.

Late Sukhumvit was another area seeing high demand during the first half of this year, with 2,088 units sold out of 3,444 launched. The city fringes also did well, with 3,167 units sold out of 5,764 launched.

Selling prices in the Bangkok peripheral areas increased by only 0.8% from the second half of 2011 because of the high supply in the area, whereas the average selling price in the city and city fringes rose by 4%. The average selling price for a condominium in the city area was 145,232 baht per sq m; in the city fringes it was 98,199 baht per sq m; and in the Bangkok peripheral area it was 51,415 baht per sq m.

The trend of competition in the condominium market in the second half of the year is expected to be concentrated along the main suburban BTS extension lines. As urban land prices rise, developers have turned their attention to the outskirts of the city, creating new markets (and housing supply) in three main areas: Chaeng Watthana-Ngam Wong Wan, On Nut-Bearing and Thon Buri. Neighbourhoods along the BTS extension are seeing many large-scale projects cropping up, creating heated competition. In On Nut-Bearing, projects are concentrated around On Nut, Udomsuk and Bang Na.

Along the Taksin-Wong Wian Yai BTS line, the extensions to Pho Nimit and Ratchada-Ratchaphruek opening late this year have attracted the return of large developments.

Around the two soon-to-be operating stations, four major developers are among those launching launched large condominium projects: Land and Houses, with The Key Sathorn-Ratchaphruek; Quality Houses; Asian Property; and Property Perfect.

During the second half of this year, there will be more condominium units in the Bangkok peripheral area due to land availability. However, with the rapid increase of supply, and demand unable to absorb all the new supply, the selling prices of condominiums in the peripheral area will likely be stagnant or decrease slightly at some projects.

In light of the expected market correction  on the periphery, many developers will try to acquire land in more central locations in order to develop condominiums.

These city developments would be marketed to Thais seeking residences for themselves and units for investment, and to foreigners, mainly Asian buyers and investors from Singapore, Hong Kong and mainland China.

Risinee Sarikaputra is associate director of research and valuation at Knight Frank Chartered Thailand. Contact risinee.sarikaputra@th.knightfrank.com.