Condo boom to continue

The market is being driven by factors as diverse as BoI incentives for low-cost housing and lifestyle changes incorporating the convenience of mass rail transit.

The logical reasons behind the condominium boom in Bangkok ensure that the stellar rise of this segment will continue in the future, but with a marked difference: Buyers are now as keen on areas where mass transit rail lines are headed as as they are on areas which are already part of the grid, said Prateep Tangmatitham, the chairman and founder of Supalai Plc.

Fears of higher oil prices and a desire for the convenience of being close to the rail lines are two obvious reasons for the boom, but others include problems finding reliable household help, and the better security that condominiums provide.

Equally important but not generally noticed is the sharp decrease in the size of households in Bangkok, which further encourages condominium living. Research by Supalai shows that the average number of people per household in the Bangkok metropolis shrank from 3.20 in 1995 to approximately 2.50 in 2008-09.

“Smaller families fit into condominium units, while bigger families need a house, so that’s why there is a strong demand for condominiums,” said Mr Prateep.

He also debunked the generally held view that the take-up rate of condominiums in areas already covered by the BTS and MRT is better than those yet to link up to the grid. Supalai’s research shows that in fact the reverse is true.

The take-up rate of outstanding condominiums in Bangkok costing less than one million baht is 74% in mass transit areas and 76% in non-mass transit areas. In the one to three million baht bracket the rate is 78% in mass transit areas and 79% in non-mass transit areas, and in the more than three million range the respective proportions are 74% and 77%. Overall the difference is 76% for mass transit areas and 77% for non-mass transit areas.

Mr Prateep agreed that the main reason behind this trend is the attractively lower prices in areas yet to be served by rail lines. Buyers are willing to wait a couple of years to link to the mass transit grid, especially as it takes that long for a new condominium to be built.

Clearly Supalai believes in its research because it recently launched two high-rise condominiums, one at the Asok-Ratchada intersection and the other opposite SCB Park in Ratchayothin.

Interestingly, the SET-listed company is also going to build a BoI condominium project either in Soi LaSalle (Sukhumvit 105) or Soi Baring (Sukhumvit Soi 107).

The Board of Investment (BoI) this year improved incentives to developers to build more low-cost housing, and many big players have responded. Mr Prateep explained that the BoI incentives lower the cost by 5%, but the developer also has to price units at a maximum of one million baht. While the profit margin per unit is lower, the volume ensures a healthy return.

He expects other companies to also launch BoI-promoted projects, though they could take longer as developers must obtain environmental impact assessment (EIA) approval and building permits before applying for the incentives.

While they will cost just one million baht, Supalai’s BoI condo units will be a bit larger than the 25 square metres being offered by some companies. “We will be building not less than 30 square metres so that people have space to move around.”

Supalai has projects in the provinces too. It is getting ready to launch a 15-storey condominium in downtown Phuket with a total of 500 units and valued at approximately 900 million baht.

Mr Prateep is targeting both Thai and foreign buyers on the resort island and is optimistic of doing well in the mid-market development priced from 1.2 million to 5 million baht.

Although he is not dabbling in the high end of the Phuket market he does expect this segment to revive in future.

“The high-end buyers will come back when they feel that everything is good for them once again and it’s time to invest.”

However, he said, in his experience condominiums costing from one to five million baht are really hot in the Thai market, while units costing more than that are not selling quite as quickly.

SOURCE: The Nation