The condominium market in Hua Hin will continue to see strong growth as many leading developers, listed and non-listed, including major companies from Bangkok, are planning new projects this year in the seaside community just three hours' drive from the capital.
Last year was a very busy one for the Hua Hin condo market, with 6,360 units launched at 19 developments. Over most of the past decade the condominium supply in Hua Hin has consisted mostly of two- and three-bedroom units. However, there has been a significant shift in recent years. with one-bedroom units, some priced as low as two million baht, starting to predominate. This reflects in part the growing number of people, mainly Bangkok residents, seeking affordable weekend getaway residences or investment properties to rent out.
Traditionally most purchasers of Hua Hin condominiums have been looking for holiday homes, but lately more people are buying with an eye to earning rental income. Hotel development in Hua Hin has not kept pace with the growing popularity of the area among tourists, and thus rental condominiums are in demand for short stays of one to three days, usually from Friday to Sunday or on long weekends. There is also an opportunity to rent condos to foreign visitors for longer terms, in some cases as much as six months.
Nonetheless, demand in the Hua Hin condominium market is predominantly generated by Thai buyers, about 75%. This contrasts with the Pattaya market where there is a good mix of Thai and foreign buyers, many of them employed at the Pattaya and the Eastern Seaboard industrial estates. A significant percentage of buyers are expatriates working in Bangkok as well as foreign retirees, mainly Scandinavians, Russians and Germans.
Thai buyers have become very strong drivers of Hua Hin condominium sales as a growing number of people from Bangkok seek second homes or holiday properties. Most of these buyers are quite affluent and they choose Hua Hin not only for its proximity to Bangkok but also because it offers a more relaxed pace than Pattaya.
Figures compiled by Knight Frank Thailand on Hua Hin condominium supply from 2003 to 2012 show that last year was a remarkable one, with cumulative supply rising to 19,753 units, an increase of 47% from the end of 2011. The Knight Frank survey covers Cha-am, Hua Hin, Khao Takiab, Khao Tao and inland areas.
New supply increased sharply in 2012 with 4,084 units launched during the first half and another 2,276 entering the market during the second half of the year.
Cha-am remained the most popular location in the area, continuing from the previous year. This reflected the better availability of land plots as well as the existence of several retail developments providing an extensive range of restaurants and shopping that make it more convenient for residents. A total of 2,518 units, or 40% of all condos launched, were at six new developments in Cha-am in 2012.
The second most popular location was in North Hua Hin, from Soi 1 to Soi 61, with 1,290 new units, or 20% of the total launched, followed by the Khao Tao with 17% and Khao Takiab with 12%.
Unit take-up has also been rising dramatically, from 1,076 units sold in 2010, to 1,344 in 2011, and jumping to 4,312 last year. However, the sheer volume of new units entering the market meant that the take-up rate decreased from 72% in 2010 to 45% in 2011, when nearly 6,900 new units were launched.
Our research indicated that the take-up rate in 2012 increased to 52%, with total demand of around 10,339 units as of the end of the year.
No new condominium projects were launched in South Hua Hin, where prices normally are the highest, due to the scarcity of land. Consequently, the selling prices of new projects were the highest in North Hua Hin with an average of 105,737 baht per square metre as of the end of 2012, an increase of 5% compared with the previous year. Condominiums in Cha-am were close behind at an average of 102,334 baht sq m, an increase of 13% from the previous year. The average selling price in Khao Tao was 100,572 baht sq m, up 7%.
Because land plots for property development in prime locations, especially in the south of Hua Hin, are becoming scarce, land prices are soaring. Thus we expect the future supply of condominiums to be concentrated in Cha-am and in the northern part of Hua Hin where land is still available at lower prices.
Developers need to be careful to strive to balance the supply and demand for Hua Hin condominiums, as the target buying groups are not as diverse as in other markets, such as Pattaya. If they continue to develop a large number of new units they will face an oversupply and unit prices will decrease.
Condominium supply in 2012 reached a very high level and unit selling prices fell. This reflected the decisions by some developers to move downmarket _ meaning reduced specifications _ helping to push down construction costs and unit selling prices.
Risinee Sarikaputra is associate director of research and valuation with Knight Frank Thailand, contact email@example.com.
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Writer: Risinee Sarikaputra