Knight Frank Thailand Reveals that Super Prime and Prime Condominium Market in Bangkok Continued to See Significant Price Rise; Far from Being Over-Supplied

 According to Knight Frank Thailand Research, the Bangkok Super Prime and Prime Condominium Market recently commanded the spotlight. Accounting for less than 5 per cent of the total Bangkok condominium supply, the segment enjoyed relatively good sales due to great locations in the heart of Bangkok, which afford convenience for transportation, ease of access to facilities and amenities, and tranquil city surroundings. Given the scarcity of land in the Bangkok CBD area, the new supply of condominiums in this category saw selling prices of newly launched projects increase relatively sharply compared to lower-end Bangkok condominiums. For super prime units, the prices jumped from THB 303,250 per square metre at the end of 2015 to THB 319,095 per square metre at the end of the first half of 2016. In the same period, the selling price of prime condos increased from THB 226,350 per square metre in 2015 to THB 242,313 per square metre. With more yet-to-be-announced prime projects in developers’ pipeline, it is forecasted that the average selling prices will continue to rise despite the market showing signs of slowing down in 2016.

 

FIGURE 1: Super Prime and Prime Accumulated Supply and Supply by Location, 2008-H1 2016

SUPER PRIME

H1 2016 Super Prime and Prime-01

H1 2016 Super Prime and Prime-02

PRIME

H1 2016 Super Prime and Prime-03

H1 2016 Super Prime and Prime-04

For the Super Prime market, there was no new unit being introduced into the market in this period, thus there were 1,960 units from a total of 10 projects. The Residences at Mandarin Oriental Bangkok located on the Riverside was the most recent Super Prime project, having launched in 2H 2015 with 146 units. The market supply share by location remained relatively equally distributed, with the Sukhumvit area having the highest share of 29 per cent or 578 Super Prime units.

As for the Prime market, KRAAM on Sukhumvit Soi 26 was the only Prime project launched within the period, adding 126 units to the Bangkok Prime condominium market. The Prime market currently stands at 2,674 units with Sathorn still boasting the largest share of the Prime condominium supply at 37 per cent, followed by quickly growing Sukhumvit at 28 per cent.

 FIGURE 2: Super Prime and Prime, Demand and Accumulated Sold Rate, 2008-H1 2016

SUPER PRIME

 H1 2016 Super Prime and Prime-05

PRIME

 H1 2016 Super Prime and Prime-06

The Super Prime condominium market saw an increase in accumulated demand in the first half of 2016 with around 69 units being taken-up, most of which are from recently launched projects. Many of the transactions occurred within this period took place in resell markets with 2015 developer-sold units being sold by buyers to take profit on the capital gain prior to the completion and actual unit transfer date. Whether this qualifies as speculative purchases remains unclear, as many of the buyers in this market clarified that their purchase decisions were for self-occupancy. The overall accumulated sold rate increased only slightly from 63.4 per cent six months ago to 66.9 per cent. The Prime market has seen 190 units being sold within the period mostly from the two newer projects, BEATNIQ on Sukhumvit Rd (near Soi 32) and KRAAM on Sukhumvit Soi 26. The 190 taken-up units translated to only a 3.8 per cent increase on the accumulated sold rate due to new supply being introduced. Sales from older projects remained relatively slow. This is unsurprising given periods of high demand in 2015.

 

Ms. Risinee Sarikaputra, Director of Research and Consultancy, Knight Frank Thailand, said, “We are observing more foreign buyers’ interest in super prime and prime condominiums in Bangkok. Two years ago, the proportion of foreign buyers was averaging around 5 to 10 per cent; now we believe the number is around 10 to 15 per cent.”

Ms. Anchalee Kasemsukthawat, Director, Residential Department, Knight Frank Thailand Co., Ltd., added that prospective clients looking to buy Super Prime condominium units yearn for privilege and exceptional 24-hour world-class services on a par with 5-star hotels such as concierge and serviced dining space for an exclusive chef table in addition to prime location, convenience and privacy. Most Thais account for Super Prime condominium buyers, purchasing a Super Prime unit as their lifestyle product and second home that serves their exclusive lifestyle. Moreover, foreigners who buy Super Prime condominiums are expatriates in Hong Kong and Singapore and Taiwanese who have businesses in Thailand.

 Figure3: Average Selling Price per Square Metre

H1 2016 Super Prime and Prime-09

 

We are starting to see a slowing growth in the average selling price per square metre in both Super Prime and Prime markets. By the end of the first half of 2016, the per square metre prices were THB 319,095 and THB 242,313 for Super Prime and Prime condominiums, respectively. This time, the Prime market saw a more significant half-on-half (HoH) rise in price than the Super Prime market

at 7.05 per cent half-on-half against 5.23 per cent. Despite the slower growth, prime land scarcity and lack of new product under these two categories can continue to push prices up even in the slowing economy.

Knight Frank Thailand Research revealed that the Thai economic climate is starting to have an effect on the upper-end of the real estate market in Bangkok. Developers are now slowing down the launches of new flagship projects; much of the newly acquired prime land by developers, which had already been cleared, saw months of inactivity. The demand side risks such as lowered consumer confidence and mild deflation have contributed to reducing unit take-up numbers. It is also possible that the high-end condominium market is not exempt from speculative activities as we are seeing many yet-to-be-completed units listed in the resale market.

Despite the above, the Super Prime and Prime Bangkok condominium market still outperformed the overall Bangkok condominium market — and is far from being over-supplied. At this time of year, we would see many of these high-end projects coming to completion, and it would be interesting to see the number of buyer-occupiers against the quantity of buy-to-let units.