Why is it that condominium prices in the same location of Bangkok can be so different? When looking to buy a condominium, most people start by choosing the location. Once they have made that key decision, they then look for information on condominiums for sale through the internet, classified advertising and estate agents. They will notice that condominiums in the same location have various price ranges per square metre, whereas in some countries the prices per square metre for properties in the same location will be similar.
photo: Bangkok post arc hive
For example, in the Lumpini area, between Athenee Residences and All Seasons Mansion — two developments of similar quality located just a few hundred metres apart — there is a big difference of about 50,000 baht per square metre in achieved selling prices. Somkid Gardens and New House on Phloenchit Road serve as another set of examples of the wide gap in prices.
A number of factors affect the price appreciation of each condominium. The age of the building is the most noticeable determinant of price. In Thailand, condominiums age quickly when compared to office properties and other types of single-ownership buildings. One reason is that the building management may not be as efficient, or the budget to maintain and improve the building is not as generous as it should be due to the multi-ownership structure, which requires a consensus for approval.
New condominiums are usually priced 20-30% higher than older buildings in the same location. However, old buildings are not necessarily doomed to slow appreciation in prices. With good management, some old buildings have higher prices per square metre than other buildings of the same age.
A good example of this is Domus Sukhumvit 16-18 which was completed in 2007. Prices have appreciated from 80,000 baht per square metre when it opened in 2005 to 150,000 baht in 2013. In contrast, in other low-rise condominiums completed in the same year as Domus, such as La Vie En Rose on Sukhumvit 36 and Silver Heritage on Sukhumvit 38, current prices are just under 100,000 baht per square metre.
The distance to mass-transit stations also plays an important role in the buying decisions of condominium purchasers. Land prices along mass-transit routes have continued to increase and it is likely that new condominiums along these routes will be more expensive than existing projects. Condominiums near mass transit lines are also easier to rent out. Old buildings near mass transit lines, such as City Smart on Sukhumvit 18, are still popular for renting out and reselling.
The number of units in each building is another factor that can influence pricing. In a building with a larger number of units there will be more competition for rentals and resales than in a building with fewer units. This could help explain the success of Domus, which has just 108 units, relative to peers such as the 604-unit Millennium Residences.
Unnecessarily large unit sizes and inefficient layouts make the price per square metre lower than for units with efficient layouts and reasonable sizes. Buyers today value functionality and practicality rather than paying for unused space. Not only do large unit sizes affect total unit prices but also contribute to larger sums of common area fees.
It has been proven that high-rise buildings will command higher prices per square metre than low-rise buildings. The main reason is the view, especially from higher floors. In addition, high-rise buildings tend to have more facilities than low-rise buildings which, in most cases, are built on smaller plots of land. Condominium units in new low-rise buildings today in the Sukhumvit area average 120,000 to 150,000 baht per square metre, while at comparable high-rises in the same location, prices range from 150,000 to 250,000 baht per square metre.
A buyer will pay a premium for unique views. Living in the city centre, it is difficult to find a unit with an open view that is not blocked by another building. Buildings facing a public park, offering a river view, or in an area where there is no planning for new development command higher prices.
For example, Ratchadamri Road has a view of the Royal Bangkok Sport Club, Ratchadaphisek overlooks the Tobacco Monopoly Lake, and Witthayu Road overlooks Lumpini park and the Ambassador Residences. The view factor also influences the ability of the owner to rent out or resell a unit. That is why, within the same building, the unit with a better view will cost more than one with an obstructed view.
Product quality is a factor dictating the grade of the buildings. Each building has various grades of materials and specifications. These cover the materials of the facade, common area decorations, unit specifications including flooring materials which range from laminated wood to solid-core wood, homogeneous tile to high-quality imported tile and natural stone, bathroom finishes, branded accessories, kitchen cabinets from branded to custom-made, and ceiling heights which vary from 2.45 to 3m.
The ease of renting and achievable yields constitute another key factor affecting price appreciation. Buildings that are easy to rent out need interiors that appeal to expat tenants and also have facilities that will attract expat families, such as swimming pools, tennis courts and a decent-sized gym with quality equipment.
Even with all the above factors taken into consideration, often there is no easy answer as to what will drive the price of a condominium unit in Bangkok. Unlike in other cities, location is one factor but not the only critical factor. The other factors are a mix of age, specifications, design, size, number of units, mix of owner-occupiers and non-resident rental investment owners. Other factors include whether the property is unique in terms of view or in the ratio of units to site area.
The complexity of the Bangkok market, with a wide range of prices per square metre in the same location, means that buyers need expert advice based on factual price information, something else that is not as readily available publicly as it is in other countries. n
Aliwassa Pathnadabutr is the managing director of CBRE Thailand. She can be reached at bangkok@cbre.co.th; Twitter: @CBREThailand; Facebook: www.facebook.com/CBRE.Thailand; website: www.cbre.co.th.