Bangkok is now challenging Singapore and Hong Kong as one of Asia's top luxury property investment destinations. Properties at the top end of the market have performed consistently well in recent years with a range of impressive, exclusive projects setting new benchmarks for quality, service and price per square metre.
Thailand remains a very positive long-term investment option as the source markets for buyers seem to be expanding continually, giving investors plenty of scope for yields and capital returns. The global hospitality chains Waldorf Astoria, Ritz Carlton and St Regis have opened enclaves that offer luxury through five-star service.
Prime property in Bangkok will see limited growth for lack of suitable land at reasonable prices, increasing the likelihood of higher prices for well-planned and unique projects. However, Bangkok property prices are still highly attractive compared to Hong Kong, Singapore, Shanghai, Jakarta, Kuala Lumpur and other major cities in the region. Among them, Bangkok is a favourite lifestyle choice.
Foreign buyers almost disappeared from Bangkok's luxury condominium market in the two years following the start of the global financial crisis in late 2008. During the downturn, many developers postponed launching luxury projects as a result. However, the ultra-luxurious Bangkok residential market started to pick up again last year.
Branding, long known to be an important marketing tool for companies in all sectors to distinguish their products from those of their competitors, is now being used to great effect in the Thai property market. Branded property is reserved for residences that are managed by high-end hotel operators with the hotel typically present on the site.
Currently, there are four hotel-affiliated condominium projects in Bangkok: St Regis Residence, Sukhothai Residences, Ritz Carlton MahaNakorn and Banyan Tree Residence. Banyan Tree Residence has reported a sold rate of 60%, and St Regis, which was launched in 2009, has achieved 80% sales with only seven units left. Ritz Carlton MahaNakhon, launched in 2009, has a sold rate of about 40%. At The Sukhothai Residences, built in 2007 and the first hotel-branded property of its kind, the sold rate is around 70%.
Demand for these condominiums typically comes from high and ultra-high networth individuals who come to Bangkok on a regular basis, either for business, leisure or both. The primary target market is foreigners (70% of the total) consisting of Hong Kong Chinese and Hong Kong expats, Singapore Chinese and expats, mainland Chinese and Russians. There are also secondary buyers (10%) from Europe, the Middle East, India, North America, Australia, Taiwan and South Korea.
With the convergence of Asean economies, we are likely to see a gradual growth in Thai property investment from neighbouring countries over the next few years. Many residents of Thailand have entered the luxury segment, some as investors, buying into developments such as St Regis and Magnolias Ratchadamri Boulevard. Thais and expatriates living in Bangkok account for an estimated 20% of buyers in these properties. End-users tend to focus on larger units that are more practical for living, while buy-to-let investors and speculators focus on smaller units that will be easier to let out.
The appeal of Thailand and Bangkok to expats is well documented. According to HSBC's Expat Navigator survey of more than 4,000 expats in 25 countries in 2010, Thailand ranked No1 among countries offering the best experience for expats. Canada and Spain ranked second and third respectively. Thailand also ranks No2 among countries with the best work-life balance, behind South Africa and ahead of Spain.
To their buyers and investors, branded residences represent a reward for hard work and sacrifice. Thus, the design and branding must represent prestige, comfort, luxury and high perceived value. Concierge, business facilities and other services of the residence must be provided to create convenience for clients. The facilities must be complete for clients to have a healthy lifestyle, including exercise, quality dining and ways to rejuvenate while living a busy life.
While many people use their branded residences as holiday accommodation, they also view them as good places to meet people with similar interests, local and international peers for conversation and networking. A good branded residence will be much more attractive if it conveys its prime brand worldwide, attractive architecture and design, superior services and perceived value where the location is considered prime.
The limited supply has resulted in average selling prices of Bangkok luxury condominiums ranging from 225,000 to 320,000 baht per square metre, an increase of about 4% from last year. The cheapest unit was sold for 35 million baht, while the most expensive fetched 330 million. The selling price per square metre of Bangkok luxury condominiums is double the average for the rest of the city. But the price points still represent excellent value, with Bangkok's luxury residential prices averaging US$8,515 (261,000 baht) per square metre, significantly lower than in other metropolitan cities in Asia.
Risinee Sarikaputra is associate director of research and valuation at Knight Frank Chartered Thailand. Contact email@example.com.
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Writer: Risinee Sarikaputra