The Bangkok condominium market performed more poorly than expected in the first three quarters of 2014 due mainly to political tensions, but a recovery started to take hold in the fourth quarter as confidence among developers and consumers alike improved in line with a return of political stability.
This year the number of units is expected to grow by another 10%, with a focus on higher-priced condos because high household debt levels have curbed purchasing power at the lower end of the market.
Supply: About 8,000 new condominium units were completed and registered at the Department of Land in the last quarter of 2014, bringing the total existing supply for all of Bangkok to about 425,570 units. More than 50,000 units are scheduled to be completed in 2015.
The 15,560 units launched in the fourth quarter represented the highest total among all quarters in 2014, reflecting pent-up demand after the turbulent first half of the year. The total for the full year of 50,100 was only 2% fewer than in 2013 and higher than most people had expected in light of the poor market conditions earlier in the year.
Listed developers are still the main players in the Bangkok condominium market, accounting for 30,550 units, or more than 60%, of all units in 2014. New launches in 2015 may be 5-10% higher than in 2014 because most developers expect to grow by about 10% from 2014 onward.
Demand: The New Residence Buyers’ Confidence Index, compiled from surveys by the University of the Thai Chamber of Commerce, hit 82.4 in August 2014, but then declined from September through to November as economic and political concerns affected confidence. It recovered to 78.2 in December 2014, which also coincided with a large number of project launches by developers.
The average take-up rate of all condominium units launched from 2011 to 2014 was approximately 73%; about 47,100 units are still available in the market. It would take more than one year to sell all these units without any new project launches during that time. The number would exceed 65,000 units if condominiums owned by investors and ready to be resold were included.
Many projects by listed developers had high take-up rates, especially some in the central business district, which sold out within a few days of their launches. The decline in overall take-up rates, however, was due to many factors that influenced Thai confidence, such as rising household debt and the economic slowdown.
About 38,500 units with average prices starting from below 60,000 baht per square metre and ranging up to 100,000 baht per sq m are still available in the market. Meanwhile, luxury condominium projects priced above 200,000 baht per sq m are 90% sold out with only about 100 units available. Freehold units in particular are very rare.
The areas around some new BTS stations, especially Wutthakat and Punnawithi, still have many condominium units available because developers launched a large number of new projects in recent years in anticipation of greater demand once mass transit started operating.
Demand in the condominium market in 2015 may show a similar or slightly decreased trend compared with 2014. Although the confidence index in December rose sharply from November, many factors will still affect confidence in 2015, most notably high household debt levels and sluggish economic conditions overall, not only in Thailand but in many countries that are markets for Thai exports.
Prices: Average condominium selling prices have been increasing by 5-10% per year and will continue to increase slightly in 2015. But new developments are increasingly competing for buyers with second-hand units in the same locations at lower prices.
While oil prices have fallen, their overall impact on construction material prices is low, so condominium prices in 2015 will continue increasing, especially for projects along the existing mass-transit lines.
New projects that are scheduled to be launched in the city area in 2015 are expected to start at more than 250,000 baht per sq m because land prices are very high. Available units with prices higher than 200,000 baht per sq m are also rare in the market.
Forecast: Bids are expected to be called this year for some new mass-transit lines approved by the government in 2014. The new lines will be a positive factor for the condominium market, as many developers are looking for new locations.
We forecast that the number of newly launched condominium units in Bangkok will be about 55,000 in 2015, or 10% higher than in 2014, because most listed and well-known developers are planning to launch more new projects than last year.
Listed developers will remain the main players in the market, especially in Bangkok and in some tourist destinations, as well as in principal secondary cities.
Developers this year are expected to focus more on the mid- to high-priced bracket—100,000 baht per sq m and up—because many prospective buyers of lower-priced condos already have high debts and may face trouble securing mortgages.
As well, many developers are likely to open new projects in locations where they have already been successful and had high take-up rates, because they have a database of buyers and good references. n
Surachet Kongcheep is the associate director for research of Colliers International Thailand. He can be reached at surachet.kongcheep@colliers.com.