The impact of prolonged political unrest on the property market prior to the May 22 coup is clearly seen in second-quarter figures for the Bangkok condominium market. According to data compiled by Knight Frank, 25 condominium projects were launched during the period with 11,053 units, a decrease of 16% from the first quarter of the year.
Good progress: The MRT Purple Line bridge across the Chao Phraya River is almost complete. The 23km line from Bang Sue to Bang Yai is expected to be finished in 2015.
The new launches brought the cumulative Bangkok condominium supply to 326,493 units as of June 30.
The majority of the new supply — 8,040 units or 73% of the total new supply — was launched in the city's so-called peripheral areas. This includes "late Sukhumvit", from Soi 63 eastward; Thon Buri, focusing on neighbourhoods around new or planned BTS stations; and other up-and-coming areas for condominium development such as Chaeng Watthana, Kaset-Nawamin, Srinakarin and Phetkasem.
In the suburbs area, a total of 2,391 new units were launched in the second quarter, compared with just 855 in the first quarter, while the figure for central Bangkok was 622.
The growing attractiveness of the suburbs can be seen at the Wish Signature condominium, located between Phetchaburi sois 18 and 20. The developer is reporting an average selling price similar to projects in the central area. Another interesting project is Rhythm Asoke II, located on the inbound side of Rama IX Road, with an average selling price of 150,000 baht per square metre.
In the suburbs, the biggest concentration of new condominiums, totalling 2,541 units, is located in the northern part of Bangkok and along the MRT Purple Line from Tao Poon to Klong Bang Pai. In southern Bangkok and along the MRT Dark Blue Line 2, from Hua Lamphong to Lak Song, 2,415 new units have been launched.
Total demand for Bangkok condominiums during the second quarter of 2014 was 5,834 units, a decrease of 475 units or 7.5% from the first quarter. However, the take-up rate increased to 52.8% in the second quarter from 48.2%. The highest demand was seen in the suburbs, with 4,332 units sold, followed by the city fringe (1,125) and city centre (377).
The highest take-up rate was in the city centre, at 60.6%, due to the small amount of new supply launched. This was followed by the suburbs at 53.9% and city fringe at 47.1%. The reason that city fringe condominiums have the lowest take-up rate is that selling prices are high and approaching city centre levels. As a result, buyers have adopted a wait-and-see strategy.
The majority of buyers of condominiums outside the city centre were Thais, purchasing units for their own residences, whereas buyers in the city centre were Thais and foreigners, mainly from Hong Kong, Singapore and Japan. This group mostly buys units for their own use while in Thailand and as investments, as property offers a better yield than other asset classes, along with the possibility of capital appreciation.
Selling prices continued to increase during the second quarter, especially for condominiums in the city fringe area, which rose by 8% from the first quarter, to 133,944 baht per square metre from 124,078 baht. Developments located on the city fringe, with easy connectivity to the city centre, have been able to achieve selling prices on a par with those in the central area, due to the lack of new condo supply in the latter.
Condominium selling prices in the central area increased just 0.2% from the first quarter, from 174,607 baht per square metre to 175,000 baht. The most notable newly launched condominium in the area during the second quarter was Rhythm Sukhumvit 36-38, with selling prices ranging from 150,000 to 180,000 baht per square metre.
The property market in the capital is expected to enjoy steady growth with the return of political stability and the revival of the economy after months of sluggishness and uncertainty. And while some industry watchers and economists are concerned about oversupply in the Bangkok condominium market, we believe the prospects remain good in the city centre and city fringe markets.
The latter is supported by its convenience in terms of transport, especially its proximity to the mass transit system. Consequently we expect to see a greater number of new launches during the second half of this year.
With land prices rising in the city centre and fringe areas, new condominiums will be even more expensive and this will push up prices in completed buildings.
Many investors, both local and international, take the view that property offers a better yield, together with the potential for capital appreciation; thus, condominiums located in the central and city fringe areas will be in demand for both Thais and foreigners.
Risinee Sarikaputra is the director of research and consultancy at Knight Frank Thailand. For more information and inquiries, contact risinee.sarikaputra@th.knightfrank.com.
