New condo supply being launched in Bangkok next year will continue to decline as the unsold amount keeps rising and prices remain competitive, says property consultant Colliers International Thailand.
Phattarachai Taweewong, associate director of the research department, said the number of unsold condos in Bangkok is rising as the average sales rate of new supply launched this year was only 46%, down by 12 percentage points from 2018.
"Developers delayed the launch of new condo supply in the fourth quarter until next year, a drop of over 40% compared with earlier plans," he said.
"If they did not do so, the sales rate of condos this year might have been lower than 46%."
The average sales rate of new condo supply in the fourth quarter improved to 46% from 40% in the second and third quarters and 44% in the first. The better sales rate in the fourth quarter was attributed to the lower amount of supply launched.
Some projects launched in the fourth quarter were focused on overseas markets before opening in Bangkok. As a result, those projects had sales on hand from foreign buyers and filled their foreign quota.
Mr Phattarachai said more than half of new condo projects launched this year had a sales rate of less than 30%. Some projects had a sales rate of as low as 5%.
"Some developers with very low sales rates for condos shifted to develop hotels instead. Some cancelled projects, returned booking money to buyers and either held or sold the land," he said.
Some condo projects designed units ready for rent to tap investment buyers, said Mr Phattarachai. These units looked like a hotel room, smaller in size at only 25 square metres for a studio and 30 sq m for a one-bedroom, with no living room.
Colliers estimated the total new condo supply launched in Bangkok next year will be 40,000-43,000 units, down from 44,662 units worth a combined 219 billion baht in 2019.
The amount this year is a decrease of 33.4% from 66,021 units in 2018, yet close to the level in 2017 at 44,065 units.
The majority of new condo supply launched this year, some 19,514 units accounting for 44% of the total, was in outer Bangkok locations as plot prices remained low. This allowed developers to offer units priced lower than 100,000 baht per sq m.
This change made the average price of new condo supply decline by 7.1% to 123,130 baht per sq m. Some 46% or 20,493 units were priced between 50,000 and 100,000 baht per sq m.
Listed developers continued to outperform non-listed firms as their condo sales rate was 50% on average, higher than the latter with a sales rate of 40%.
The highest sales rate was for units priced 100,000-200,000 baht per sq m at 48%, followed by units priced lower than 100,000 baht per sq m (47%), while those priced 200,000 baht or higher recorded only 36% sales.
"2020 will be a market for buyers who are ready as there are many positive factors for convinced buyers such as property incentives and promotions," he said.
"New supply being launched in 2020 will have fierce competition, not only from other new units but also existing unsold units. If possible, developers should delay launches until 2021 to wait until unsold inventory decreases further."
Mr Phattarachai said new supply being launched next year should be in locations where developers are confident about demand as they may incur costs from the new land and building tax if their units remain unsold.
