Knight Frank Thailand Shares Thailand Real Estate Market in 2017 Under 3.4% Economic Growth Expectations

INOFO TH Real Estate Market 1

 

General Outlook of Residential Condominium Market in Bangkok

 

  • The overall sentiment is that investments in this market must be watched cautiously. Purchasing power remains subdued, and the income levels of those in new segments of demand are not high enough. Household debt continues to be high, and banks remain stringent on releasing credit, with a high volume of loan rejections, especially when it concerns budget condos outside of Bangkok. Investors should be careful.

 

  • The budget condo market in the outskirts of Bangkok still has a high level of risk due to the weakening market conditions. There is also a high supply remaining in the market, especially along the suburban train lines. Moreover, new projects are still being planned to boost development, given that there is still an ample supply of land available for development.

 

  • The fringe area of Bangkok is likely to offer good development opportunities. There is still demand while supply of available land for development is limited. Projects launched in such areas have a good chance of achieving high sales. Prices may rise.

 

Areas of Risk

 

  • The area around Rattanathibet and Tiwanon Roads has a lot of remaining supply, high market competition, and a low absorption rate. Purchase power is also weak and there may be price reductions in the area.

 

Areas Worth Watching

 

  • The areas around the new train lines, such as the Orange Line, Light Green Line, Mo Chit-Khukhot Line, Yellow Line, and Pink Line, still have low supply. Purchasing power is likely to remain strong. However, caution is warranted, as the supply of land available for development is high.

 

  • The Rama 3 area near the central business district of Silom and Sathorn

 

 

General Outlook of Super Luxury Condominiums in Central Bangkok

 

  • The overall market outlook is good with consistently strong purchasing power, but there are also continual launches of new developments.

 

  • Price levels remain high and may rise due to the steady price increase in available (and increasingly scarce) land suitable for development.

 

  • Market speculation may be quite high – especially in projects with small units.

 

  • The sales rate may be quite slow as the unit selling prices are high.

 

  • The investment market is limited due to the high sales prices, which diminishes rental returns. Also, the rental market is small.

 

  • Sukhumvit remains the main location with the highest demand.

 

 

Office Market

  • The overall economy likely experienced 3.5 to 4% growth.

 

  • The volume of new supply entering the market is still small and lower than the demand.

 

  • Rental rates are likely to rise in a market that is more favourable for lessors.

 

  • Land prices are still high, and when compared to current rental rates, the cost of land does not command high enough returns on investments. For upcoming new supply, project owners must expect lower returns or rent land for development, which keeps capital costs down. The latter poses opportunities for owners of lettable land plots.

 

  • Renovations of old buildings to have higher specifications will help building owners increase their revenue.

 

Industrial Property Market

Advantages

 

  • The overall economy likely experienced growth.

 

  • The Eastern Economic Corridor project and the construction of the Bangkok-Rayong high-speed train will be factors that spur government investment in Rayong, Chonburi and Chachoengsao provinces.

 

  • Construction of the Mab Krabao-Jira Junction-Khon Kaen dual rail system will change the logistics system in the Isan region; Khon Kaen has a chance of being developed into a logistics hub for the upper Isan region.

 

  • The increase in industrial investors from China will increase market demand.

Risk Factors

 

  • Labour shortages in the sector, particularly of skilled workers, may limit investments in the manufacturing sector.

 

  • The promotion of investment in Vietnam and Indonesia, countries that boasts much lower wage rates than Thailand, will impact investments in Thai industries.

 

Logistic Warehouse Market

  • Competition remains high, especially among large-scale developers, which will keep rents from increasing.

 

  • The Purple Zone of Bangna-Trat Road, which is a main area of logistic warehouses, is limited. Currently, sales prices are higher than what investors are willing to pay. The return on investment is reasonable.

 

  • The increase in new demand is low.

 

 

Mini-Factory Rental Market

  • The market is stable or may improve slightly. Public investment remains unclear; it is a wait-and-see situation.

 

  • There is a chance that investment in small factories for rent will expand in the eastern part of the country.

 

  • The rental rate will be stable, or it may decrease in some areas where demand is low.