Authorities and commentators are voicing concern about oversupply in the Bangkok condominium market, but CB Richard Ellis (Thailand) believes prospects remain good in the central business district (CBD).
A bird’s-eye view of central Bangkok, which CBRE predicts will remain popular for housing. Pattarapong Chatpattarasill
The property consultancy said new supply was limited in the core markets of Sukhumvit, Lumpini, Sathon, Phaya Thai and the riverside, with just over 100,000 completed units in these areas and a further 26,000 due to be ready over the next three years.
Total existing and new supply in the core CBD accounts for less than 20% of the supply in Bangkok. Developers have very little built inventory left unsold in completed buildings.
“For example, several years ago the owner of Millennium Residence was selling the remaining units in two of the towers at a discount. These have all been sold, and now we're seeing more unit buyers than sellers in this project,” said Pornpimol Phuengkhuankhan, CBRE Thailand's head of residential sales and ad hoc services.
She said this was typical of the situation in many of the best-quality, most sought-after condominiums, where CBRE saw few units being offered for resale.
Despite the political turmoil in the first half of this year, record-breaking land transactions have been occurring in central Bangkok.
For instance, it was reported that SET-listed Quality Houses Plc paid 1.7 to 1.8 million baht a square wah for a three-rai site on the corner of Sukhumvit Soi 6 to build a luxury condominium.
Rising land prices mean any new condominium projects will be more expensive than previous ones, helping to push up prices in the best ones.
Ms Pornpimol said Bangkok was a complicated market, with prices for existing condominium projects not determined by location alone.
Each building has its own individual market dynamics based on age, design quality, specifications, number of units offered for sale and popularity among tenants, making the building attractive to investors looking to buy rental units.
The result is that prices for units in different buildings at similar locations can be very different.
In some locations, CBRE has seen examples of vendors struggling to sell units in a 20-year-old building for 50,000 baht a square metre, while owners of units in more recently completed buildings less than 100 metres away sell theirs for 130,000 baht per sq m.
Expat rents are also rising for the first time in 20 years due to increasing numbers of foreigners working in Bangkok.
Many foreign tenants want to rent two- or three-bedroom units, and the supply of these in apartment buildings and condo projects is not growing.
Only 2% of the condominiums under construction in the CBD are three-bedroom units.
As rents increase, selling prices for those condominiums most popular with expat tenants will also rise, particularly in an environment plagued by low rates of return on other investments.
Few banks are offering annual interest rates better than 2% for one-year time deposits, while property offers a better yield together with the possibility of capital appreciation.
“Anyone expecting condominium prices to fall in the central area due to the political turmoil is likely to be disappointed. There's more chance of prices rising than falling,” said executive director James Pitchon.