Bangkok Condominiums Market Overview and Update Performance - Q2 2019

Highlight:

• Newly launch condominium supply slowed down during the first half of 2019. Meanwhile, developers focused on selling the remaining units from the old property projects.
• The demand for condominium dropped as negative factors from 1)  the new loan-to-value (LTV) rules to local Thai people imposed by the Bank of Thailand and 2) China economic slowdown.

Supply:

According to Real Estate Affairs research, the Bangkok condominium market  in 2018 peaked a record for the newest project launched within ten years, with some 65,000 units entered into market (+11%YoY from 2017). The Colliers international revealed newly condominium was accounted for 18,075 units in the first half of 2019.

Focusing on the 2nd quarter, the new condominiums launched with a total of 9,632 units from 26 condominium projects worth a combined 74.87 billion baht. The most massive unit amount was in June (5,100 units) due to the political situation became more apparent after the election. 71.8% of the new condominium supply or 6,915 units was in the inner city.

Demand:

Some condominium projects from listed and well-known developers still performed well by getting the high take-up rate during an official launched. However, local demand on new condominiums in 2019 will be directly affected by more stringent lending LTV rules. The LTV regulation will impact to people who purchase a condominium unit as a second home or investment property. While the first-time homebuyers will not affect by the LTV limit. The Bank of Thailand believes that the LTV regulation will improve the financial discipline of Thai property market in the long run, and control the quality of the developer’s backlog.

According to data from 22 developers rated by Tris, foreigners were one of the essential buyers in Bangkok condominiums, consisted of 27% of presale and increased to 33% in 2018. Primarily, Chinese buyers accounted for around 50% of all foreign buyers (by value) in Bangkok condominiums. Owing to the economic slowdown in China, Tris expected in short-run demand for new condominiums would impact rather than transfers of units that already under contract. Because foreign buyers need to pay 20% to 30% of down payment, however, Chinese demand is still a long term trend as calling Bangkok as a second home; said by a listed developer.

For 2nd quarter of 2019, the selling rate performance accounted for 40% of total 9,632 new units. Most buyers focused on buying completed units that were on sale. However, some newly launched projects achieved 80% to full occupancy sales rate because of good locations with lower prices than other projects in the same area.

Source: Research, Colliers International Thailand

A Sell performance of newly launched projects with price range less than THB100,000/ sqm exhibited the highest sale rate at 44% of the total units launched in the 2nd quarter. Followed by 35% of sales rate on condominium price between THB100,000-200,000/ sqm, and 21% of condominium price more than THB200,001/ sqm.

Selling Price:

The average selling price was THB148,365/ sqm, increased by 45% from the 1stquarter this year and increased by 8%-10% annually. Because most of the new projects value in the 2ndquarter was in the inner city and located along with the mass transit line extension.

Source: Research, Colliers International Thailand

For high-end and above segment, the selling price continues to rise with the average price at THB 256,201/ sqm in 2019. Within the prime downtown locations such as areas surrounding Lumpini Park (including Rajdamri, Ploenchit, Wireless Road, and Langsuan) and significant main areas in Sukhumvit road, there will be fewer new freehold condominiums due to limited freehold land available. Therefore, the high land price is set to continue to increase. This condition will impact to the feasibility of future condominium projects.

Source: CBRE Research, Q1/2019

In the past five years, condominiums priced between THB50,000-100,000/ sqm were the most massive price bracket for new supply launched, with a total of 267,029 units, followed by THB 100,000-150,000/ sqm (64,530 units) and under THB50,000/ sqm (25,579 units). The highest growth was for condominium priced at THB100,000-150,000/ sqm because of an increase in Bangkok land price.

In 2019, various developers have focused on selling condominium price between 70,001-150,000 baht or approximately 69% units launched in the first half of 2019 as it located in areas along the mass transit line.

Source: Research, Colliers International Thailand

Key Growth Drivers:

Looking forward, the new opportunity of condominium investment will be in some areas along with the mass transit network depending on mass transit lines and stations. A lower interest rate will support the property market.

Key Challenges:

The new LTV regulation is still on a challenge together with the introduction of the new land tax will make buy to rent unit less attractive. The second-hand units in the same location with a lower price will be another choice for investment instead of buying a new condominium.