Bangkok condo market off the ropes

Bangkok Condos

Bangkok Condos

Bangkok’s condo market took some heavy hits but never went down, and now looks poised for a comeback

Depending on one’s viewpoint, a glass is either half full or half empty, and this seems to apply to the current Bangkok and resort condo markets because some experts are upbeat about the outlook while others are downright pessimistic. Among those who see the sun shining is Knight Frank Chartered managing director Phanom Kanjanathiemthao.

Land prices — especially in the city near the railway lines — are not any cheaper than they were early this year or last year –

Backed by detailed research of all the launches that took place in Bangkok this year, Mr Phanom said it is very clear that the Bangkok condo market has performed much better than might be expected, and the same applies to key resorts.

While he acknowledged that several projects have been postponed, in his opinion it is significant that launches took place at all throughout this difficult year, although the total is far below peak levels reached not long ago.

Seven condominium projects were launched in Bangkok in the first quarter of 2009, two of which are considered to be premium grade while the rest are B class. The seven projects brought in a total of 1,635 units, of which 1,241 (76%) have been sold. Unit sizes ranged widely, from 31 to 515 square metres, with the average selling price between 95,000 and 195,000 baht/sq m. Significantly fewer premium and A grade condominiums were launched in this quarter, while buyers also opted for smaller and medium sized units.

The second quarter saw the launch of eight more condominium projects in Bangkok , one of them premium class, six B grade and one C grade. These new projects brought in a total of 1,751 units, of which 1,004 (58%) have been sold. Unit sizes ranged from 27 to 372.64 sq m and the average selling price was from 75,000 to 170,000 baht/sq m. Smaller and medium size units of one to two bedrooms were in greater demand in this quarter.

Two projects were launched in the third, quarter of the year, with both classified as B grade in the research Mr Phanom cited, although they are situated in the Sukhumvit zone of the city. The first is Noble Refine located in Sukhumvit Soi 26 which has an average selling price of 95,000 baht/sq m and a total of 217 units ranging from 31.67 to 70.88 sq m.

The second project, The Seed – Musee, is also located in Sukhumvit soi 26 and has an average selling price of 105,000 baht/sq m for its 138 units ranging from 33.41 to 67.41 sq m. This project has sold out.

Mr Phanom mentioned some factors propelling sales in these dicey times, one of which is extremely low bank interest rates that make the purchase of a condominium for 5-6% rental return look quite attractive.

LIGHTS STILL SHINING: The Bangkok condo market has performed better than might be expected.

Some buyers also expect prices to climb in the two to three years it will take for these new projects to be completed and see a down payment of 15-20% stretched over this period as quite affordable.

“Land prices are not dropping. Land plots – especially in the city near the railway lines, including Sukhumvit – are not any cheaper than they were early this year or last year. Prices are definitely not dropping, and more importantly, plots are not available.”

Aside from this, construction costs will soar should oil prices rise, driving future prices up.

It is also becoming increasingly clear that the lifestyle of city folk is changing with the convenience of travelling by train. Mr Phanom said he had recently moved from his house in the Rarm Intra area to a condominium in Phahon Yothin because his children can now make it to school on their own.

“Condos are a best seller in Bangkok because if you buy a house the locations get farther and farther away, and traffic is bad. The farther it is the more commute time. Previously when I was travelling to and from the Rarm Intra area the expressway was jammed both morning and evening.”

Mr Phanom said some resort markets were in deep difficulty in the first half of the year and mentioned that 95-98% of the property buyers in Samui are typically foreigners but they have disappeared in this period.

However both Samui and Phuket have seen a positive turn over the past two months, with some clients now popping in to look at 30-, 80- or even 100-million baht villas. This is better than in the first half, when few came to look around and none decided to buy.

“Pattaya faces a similar situation, because 90% of the property there is targeted at foreigners.

“When there aren’t any foreign buyers Thais too won’t buy either,” he added.

The Thai market in both Rayong and Hua Hin has improved however, after also turning quite bad in the first quarter.

Looking ahead Mr Phanom expects all property markets in Thailand to perform better next year – if the economy picks up speed.

“Looking back five to six years when the condo market really expanded, the capital gain, particularly for condos, was 10-15%. This applies especially to speculators who booked and flipped their contracts when the building was almost completed. I have to say they almost doubled their profit. They invested 15% maximum and doubled that.”

Despite the economic difficulties these speculators remain active in the market, although there are fewer of them.

“These people have money, some have turned speculation into a profession. We met many people who bought units and after taking transfer ran around trying to sell them or rent them out. They were active in many projects, buying five to 10 units and selling them.

They continue to speculate, although they may be buying less – instead of five units, maybe two.”

Ultimately the health of the property market depends on politics, with this especially affecting foreign buyers.

Mr Phanom said all the foreigners Knight Frank Chartered has dealt with have complained about the political situation, and they fear that any further turbulence will destroy any capital appreciation they might see otherwise.

The mindset of Thais differs, he said, because the majority have nowhere else to go and regardless of what happens they would continue to need a place to live.

SOURCE: Bangkok Post

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