Rising inner-city land prices fuel luxury condo boom

Rising inner-city land prices fuel luxury condo boom

Marque Sukhumvit, a 50-storey luxury condo, on Sukhumvit Road near Soi 39. Out of 148 units priced at 42-350 million baht, it has 30 units left and will start transfers next month.
Marque Sukhumvit, a 50-storey luxury condo, on Sukhumvit Road near Soi 39. Out of 148 units priced at 42-350 million baht, it has 30 units left and will start transfers next month.

Rising land prices in Bangkok's prime residential locations have attracted wealthy people to invest in the luxury condo segment, according to SET-listed developer Major Development Plc (MJD).

Managing director Suriya Poolvoralaks said condo demand in Bangkok's prime locations remains healthy and purchasing power is strong against a murky economic outlook.

"Despite a sluggish economy, buyers in the luxury segment will not dump a unit on which they have made a down-payment as they won't feel much impact from the economic slowdown," Mr Suriya said. "The lower-end segment is struggling with purchasing power and mortgage loan rejections."

He said public perception of super-luxury residential products today is better than in the past three years. Unit prices of higher than 200,000 baht per square metre which were too high in their view three years ago are now acceptable.

Many wealthy people, customers of banks' wealth management units, also are shifting their investment to luxury condos in prime locations like the Sukhumvit area. This demand is driven by land prices which kept rising every year.

Mr Suriya said financial institutions also prefer this segment. Some offer competitive packages such as zero-percent instalment payments for nine months and no charges if the whole amount is paid in the ninth month.

A shift among many developers to the luxury segment is a factor boosting land prices in prime locations and the central business district.

"We have strong confidence in the luxury segment, given our project near Sukhumvit Soi 39 where we have seen an increase of 25% in selling prices in three years to 300,000 baht per sq m," Mr Suriya said.

"The project value is also higher, rising from 6.5 billion baht since the launch in 2014 to over 7 billion baht at the moment."

Currently, land prices in Phrom Phong area are offered at 2 million baht per sq wah, compared with no more than 1.4 million baht four years ago.

The company is in talks with some landlords in the central business district to acquire land and will launch a luxury condo project with units priced from 300,000 baht per sq m in the fourth quarter this year.

In the second half, it will launch two pet-friendly condo projects under the Maru brand in two locations comprising Lat Phrao Soi 15 worth 1.8 billion baht, and Ekamai Soi 2 worth 2.3 billion baht with 200-300 units each.

"The condo market is not heating up as it has in the past few years but there is demand from new markets. It is a good investment which a buyer can rent out or sell for a capital gain," Mr Suriya said. "But the lower end of the market is sluggish."

Currently, the company has a middle-priced condo project worth 5 billion baht in the Sanam Bin Nam area in Nonthaburi, Manor Sanambinnam, which was completed in 2016. Comprising four buildings and 1,848 units, it is now 80% sold. Last year this mid-priced project where unit price was around 70,000 baht per sq m had a 40% mortgage loan rejection rate. The company has now adopted a pre-screening strategy to reduce the rejection rate.

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