While sales rates for condominium developments in Bangkok vary greatly from location to location, and from project to project, the general consensus is that condominium sales across the capital have slowed down. With a wider choice of supply to pick and choose from, buyers are spending more time researching all their options.
Demand for condominiums in Bangkok remains strong, as shown by the high volume of inquiries that JLL receives from prospective purchasers -- particularly for condominiums in central business areas. However, sales volumes are much lower than inquiries.
Wider range of choice, longer decision-making process: Many prospective buyers appear indecisive, though they claim to be serious about purchasing a unit. Overwhelmed by the considerable amount of condominium supply on the market, these buyers seem to be unsure if the different units they are looking at offer the best value for their money. As a result, they take a longer time to make a decision. However, most of them do purchase a unit in the end. It's just a matter of time.
According to JLL's Thailand Property Intelligence Centre, Bangkok's total condominium stock stands at 406,500 units at present, including the 29,200 units completed in the first half of 2016. An additional 135,900 units are coming onstream. Out of the total supply in the pipeline, around 40,000 units are scheduled for completion in the second half of this year and will bring the year-end total stock to over 446,000 units, almost doubling the total recorded at the end of 2012.
Price expectation gap persists: Most inquiries that JLL receives from prospective buyers are for high-end units based in central business areas and priced below 200,000 baht per square metre. However, the units that are available for sale in these areas have asking prices ranging from 200,000 to over 300,000 baht per square metre.
Recognising a fast growth in new supply and slower sales, many buyers expect a discount on prices. However, despite softened market conditions, condominium prices have continued to rise -- particularly for buyers who are purchasing units in newly launched projects off-plan. The growth of prices in off-plan projects is driven mainly by rising land costs, and prices generally rise further by 10-20% when construction is completed. To accelerate sales, some developers offer more incentives such as free fixed and loose furniture, transfer fee waivers, and exemption of property management fees for a certain period of time. But there is no sign of developers offering discounts on prices.
So the gap between buyers' and sellers' expectations persists, and contributes to slower sales in the Bangkok condominium market.
MINING FOR OPTIONS: Construction workers help build up the vast housing choices in Phrom Phong. Photo: SEKSAN ROJJANAMETAKUN
More developers target overseas buyers: JLL has seen increased interest from foreign buyers who are looking for condominiums in Bangkok, particularly from Hong Kong, Singapore and China. Recent purchases by and inquiries from foreign investors were concentrated in the upper-end segment where they could be more confident in the quality of design, construction and management, as well as the investment potential.
Despite low investment yields at 3% or below, foreign buyers appear interested in purchasing condominiums in Bangkok as an investment. Offering similar quality, condominiums in Bangkok are still much more affordable than those in many other expensive markets in the region such as Hong Kong, Singapore and China's major cities, including Shanghai and Beijing. In addition, many investors are willing to accept lower yields from rentals as they have a higher expectation for capital gains in the long term.
This is a sensible expectation as most of the high-end units are based in prime locations where land for future development is increasingly scarce. Limited available freehold land should encourage stronger price growth in the prime areas given robust demand at the top end of the market for well-located and well-appointed projects.
Realising the demand from foreign investors, more Thai developers are keen to market their condominium projects overseas. Reaching out to overseas buyers could be a sound idea as it would help expand sales opportunities.
However, despite keen interest, foreign investors are no less cautious than Thai buyers. Property exhibitions overseas may not generate as many quick sales as Thai developers expect unless the incentives offered are attractive enough to accelerate buyers' decision-making. n
Bunthoon Damrongrak is the head of residential sales and leasing with the international property services and consultancy firm JLL (Jones Lang LaSalle). For more insight, readers can contact him by email: bunthoon.damrongrak@ap.jll.com or visit www.JLLresidential.in.th.