Thailand-Property

Rise in apartment rents

Average monthly rental rates for foreigners opting to rent apartments in Bangkok increased in the second half of 2015 compared with the previous year according to research from Plus Property Agency.

The average monthly rental rate of apartments for foreigners during the second half of 2015 increased slightly by 0.6 percent or, THB 2 per sqm compared with the first half of 2015, and 5.2 percent or THB 17 from the same period of the previous year to reach THB 345 per sqm.

The agency said this is as a result of the launch of new projects in the Silom-Sathorn and Sukhumvit areas where rental rates are higher than market averages due to high project development costs caused by rising land prices.

Considering area-by-area as compared with the same period of the previous year, it was found that Silom-Sathorn area saw the highest average growth of rental rate at 5.2 percent to THB 367 per sqm. The next highest increase in rental rates was in the Sukhumvit area at 2.8 percent to THB 369 per sqm.

The research also found that some areas had reduced average the average rental rate, such as Rama 3 area where the average rental rate dropped 2.2 percent to THB 305 per sqm, while the Ploenchit-Chidlom area saw average rental rates declining by 1.7 percent to THB 354 per sqm.

At the same time, the Phaholyothin area saw a decline of average rental rates of 1.5 percent to THB 257 per sqm.

Taking into consideration the average monthly rental rates as categorised by the quality of projects, the Grade ‘A’ market showed an increase in average rental rated of 2.6 percent, or THB 11 per sqm over the first half of 2015, and an increase of 3.8 percent, or THB 16, compared with the same period of the previous year, to THB 434 per sqm.

As new apartment projects were launched in the Silom-Sathorn and Sukhumvit areas, average rental rates moved upwards. When considered area-by-area compared to the same period of the previous year, it was found that the Silom-Sathorn and Sukhumvit areas posted the highest increase in average rental rates as a result of new project launches pushing average rental rates in the Silom-Sathorn area up by 9.9 percent to THB 421 per sqm, and in the Sukhumvit area by 3.2 percent to THB 458 per sqm, respectively. Only the Ploenchit-Chidlom area saw a slight drop in the average rental rates – by 1.2 percent to THB 423 per sqm.

The average rental rates of Grade ‘B’ apartments were almost the same as in the previous year, with a slight increase of 0.3 percent over the first half of 2015, and a 0.3 percent increase over the same period of the previous year – to THB 300 per sqm.

Comparing area-by-area with the same period of the previous year, the Ploenchit-Chidlom area posted the highest average rental rate increase of 2.0 percent to THB 304 per sqm. The second highest average rental rate increase was recorded in the Sukhumvit area at 1.9 percent to THB 327 per sqm, and the Silom-Sathorn area saw a rise of 0.6 percent to THB 330 per sqm. The Phaholyothin area, however, posted a slight drop in the average rental rates of 1.5 percent to THB 257 per sqm as the services for bigger and more expensive units were terminated and converted to office space for rent.

The Rama 3 area also saw a drop in average rental rate of 1.4 percent to THB 282 per sqm.

The trend of the apartment market for foreigners

The situation of the apartment market for foreigners during the second half of 2015 remained similar to the same period of the previous year for both supply and demand.

The more stable political climate has encouraged developers to push forward their projects, but they were still hampered by locations and the increase in investment in construction. The demand side showed just a slight improvement as a result of the inflow of foreigners – both tourists looking for long-term accommodation and experts whose number was higher than in previous year. Some rental rates moved upwards due to some newly- launched projects with higher rental rates.

During 2016 the supply side will not change much, according to the firm, because the apartment for rent projects require a longer period to recoup the investment, and if developers do not own the land on which to invest, they may find investment costs so high that they may decide to develop another segment of the real estate business.

However, there may be some new demand as two-three years following the AEC inauguration, demand may increase due to the inflow of the foreign labour force, supporting clearer activity in the apartment market for foreigners.