Average prices and condominium supply throughout Bangkok – and not just in the centre of the city – are growing according to the latest research.
Research from real estate firm Knight Frank published this week showed that the condominium market in capital grew in terms of supply and pricing during the final quarter of 2015.
The accumulated supply of 386,199 units represented a 4 percent increase from the previous quarter, while new supply added in the quarter totalled 14,793 units, soaring 70 percent from 8,709 new units launched during Q3. Total accumulated supply in 2015 rose 17 percent compared with the end of 2014.
Meanwhile units in the central business district (CBD) continued to register steady growth in terms of price, with average selling prices increasing by 1.6 percent quarter-on-quarter (Q-o-Q) and 14.6 percent year-on-year (Y-o-Y) to approximately THB 217,706 per sqm.
According to the research new supply in Q4 was almost double new supply in Q3, as there were more large projects with up to 1,000 units launched during Q4. There were 57,941 units added to the market in 2015, thanks to the increasing number of new supply during Q4 contributed by four large projects, including Life Pinklao, Plum Condo Park Rangsit (phase 3), Plum Condo Central Station (phase 2) and Lumpini Sukhumvit 76, which together accounted for 25 percent of the total new supply.
The research also identified that, similar to previous quarters, most new supply was located in the peripheral areas. New launches in the city fringe and CBD accounted for 21 percent and 6 percent of total Q4 2015 Bangkok supply, respectively. A drop in supply in CBD was caused by the lack of available land plots that were deemed to be suitable for development.
Despite the stimulus measures launched in early Q4, the number of sold units declined by nearly 50 percent Q-o-Q. This caused the accumulated take-up rate to drop slightly from 87.8 percent in Q3 to 86.9 percent in Q4. The real estate firm said it believed that the contracted demand seen this quarter reflected real demand from end-users rather than speculative buyers, as previously seen in the market.
The perception of oversupply in the Bangkok condominium market had an effect on speculators with low levels of cash and many chose to hold their purchase decisions fearing an inability to resell their purchased units before the transfer date.
Meanwhile, loan rejections facing buyer-occupiers in the lower- to middle-market segment proved to be an issue, with banks tightening mortgage lending criteria to diminish downside risks. The current rejection rate is roughly 10 percent to 15 percent per project in this segment, according to Knight Frank Thailand Research.
Frank Khan, Executive Director and Head of Residential at Knight Frank Thailand pointed out that the areas near the central business area, such as Ratchada-Rama 9, Petchburi, Paholyothin and Ladprao, which boast access to the rapid transit systems, will continue to be desirable for the overall condominium market.
As for condominium projects along the mass transit routes, a few projects stretching along the Purple Line should exercise caution, he said, as there is a large amount of stock. Developers should be cautious when selecting a location.
On the other hand projects along the Blue, Green, and Orange Lines will have a good future, Khan said, as existing stock is still low. Developers will have good prospects if they choose the right location and offer the right product and price. He added that it is worth noting that the Ramkhamhaeng area, where the Orange Line will pass, falls short of proper parcels of land for development.
Potjaman Vorakitpokathorn, Director of Project Marketing, Residential Department, Knight Frank Thailand, said that Government measures to boost the real estate sector, such as reduced ownership transfer fees, helped stimulate sales of finished condominium projects rather than newly-launched supply however, residential properties costing less than THB 3 million per unit were the segment that enjoyed sales growth as a result of such measures.
The fringe and peripheral areas of Bangkok saw price levels registered only a slight increase of 0.4 percent Q-o-Q, representing THB 128,649 per sqm and THB 73,388 per sqm, respectively. The most impressive Y-o-Y segment was the CBD, with a rise of 14.6 percent, followed by the city fringe with a rise of 9.5 percent and the periphery areas with a 4.8 percent increase from last year.
In addition developers now are back in the “safe development strategies”, where they try to add value to their products with premium materials and superior/edgy designs, contrasting with previous strategies which overly leveraged project location and rental return guarantees. According to Knight Frank, the peripheral area is forecast to see an even slower growth compared with the average selling price per sqm since the accumulated unsold inventory remains relatively high in these locations.
Potjaman pointed out that a good combination of location, product and price is the key factor when it comes to purchasing decisions, adding that condominium buyers are young professionals and families who live an urban lifestyle and look for a condominium that offers convenience.
The proximity to public mass-transit routes, major roads and expressways is an indispensable factor. In addition good online marketing can also boost sales by as much as 40 percent to 50 percent as buyers tend to pay visits to online marketing channels before visiting the actual site of the project. She said they tend to spend roughly an hour, on average, to make their decision.
A spokesperson for the firm said: “We expect to see many upcoming premium projects in 2016, especially in mid-Sukhumvit.
“In contrast the development plans for new condominiums in the periphery areas will slow to make room for existing inventories to be taken up.”
In addition 2016 is a challenging year for small and medium-sized developers with projects in the periphery areas of Bangkok, as buyers become more cautious with purchase decisions. In the CBD, Knight Frank is expecting to see listed developers start to differentiate their premium offerings with more emphasis on unit layouts and designs, as they try to win over an even smaller pool of high net worth individuals who are still seeking to purchase condominiums.
