Knight Frank Thailand Offers Bangkok Condominium Market Outlook

   Knight Frank Thailand Research presented the outlook that new mass transit routes will continue to rule real estate conversations in the coming years as there are a lot of major public transportation changes happening in Bangkok in the near future. Expectedly heightened competition in previously less accessible zones of Bangkok, especially areas along the BTS Light Green Line Extension (Mo Chit – Kukot and Bearing – Samrong), MRT Blue Line Extension (Taopoon – Thapra – Hualamphong), MRT Pink Line (Kae Rai – Minburi), MRT Orange Line (Rama 9 – Ramkamhaeng), and MRT Yellow Line (Ladprao – Huamak). Rent and sale prices in those aforementioned areas are foreseen to increase substantially based on a project’s proximity to convenient transportation. For supply, the number of new supply launched in Bangkok is expected to mount continuously and big name developers will be key players in the market supported by their solid capital structure, high bargaining power, and innovative amenities that focus more on experiences and future lifestyle. While selling prices in the peripheral is expected to be stable on the back of land abundance and affordable land prices in the areas, prices for future supply in the CBD is anticipated to increase in line with land scarcity and soaring land prices. In 2018, more affordable units are expected to enter the market, especially those between THB 3 to 5 million that will continue to draw attention from buyers in the mid-range market segment. However, developers should be cautious in starting new projects in lower-end to middle market segments along new mass transit routes in the suburbs to cushion against the risk of oversupply. On the demand front, demand across the market will continue to be driven upwards by domestic homebuyers and expatriates. Moreover, one trend that is helping drive demand is an influx of foreign buyers, especially those from China who are looking for a safe place to store their wealth.

 

Market Overview

The Bangkok condominium market ended 2017 with a healthy performance. The overall take-up rate in 2H 2017 reached 76.5% and the average selling prices have seen an uptick in several areas. New developments continued to increase, especially those located in peripheral areas in line with urban sprawl along new mass transit routes and limitation of available prime land and high land prices in the CBD. A total of 32,258 units were launched in 2H 2017, which is the highest new supply recorded in eight quarters; as a result, accumulated condominium stock in Bangkok surged to 538,920 units, increasing 6.4% HOH. For pricing, while selling prices in the city fringe and peripheral continue to push upward, CBD prices dipped slightly 5.2% HOH due to a shift in the market share of sales away from prime Sukhumvit and towards other zones. Average sale prices of all new supply across the city slashed to THB 154,068 per sqm, representing a decrease of 1.1% compared to 1H 2017.

In 2017, more domestic developers, especially large and experienced players in the market partnered with foreign investors, mainly from Japan, China, and Hong Kong, in response to the demand expansion from overseas buyers and construction technology improvements. The locations along new mass transit routes continue to emerge in the limelight as a result of land shortage and high land prices in the city centre. More developers are also eyeing areas in Ramkamhaeng, Ramindra, and Thonburi.

Supply Trend

The Bangkok condominium sector maintained healthy momentum in 2017, with the total number of new developments rising 19% YOY to 62,751 units. In 2H 2017 alone, the total number of new supply increased 5% to 32,258 units compared to 30,789 units in 2H 2016. The second half of 2017 showed positive growth as more condominiums were launched in the CBD. Some prominent projects were launched across the major condominium zones, with the bulk located in the Sukhumvit area. Approximately 6,500 units were launched in 2H 2017, of which 51% were in Sukhumvit, followed by 22% in Wireless-Chidlom and 12% in the Rama 4 zone.  Fifteen luxury condominium projects with a total of 4,777 units were launched in 2H 2017, a strong increase of 22.8% from 1,091 units in 2H 2016. The new launches included Life One Wireless, The Lofts Silom, Vittorio Sukhumvit 39, Maru Ekkamai 2, and Ideo Rama 4

BANGKOK CONDO 2H 2017 cs-01

Source: Knight Frank Thailand

In 2H 2017, the new supply in peripheral areas was 18,732 units, representing approximately 58% of the total supply launched in the second half of the year. The newest condominium developments in the area included Knightsbridge Prime Ratchayothin, Lumpini Park Phahol 32, The Nest Sukhumvit 64, and Supalai Park Taladplu Station. Over the same time, new supply in the city fringe accounted for 22% of overall launches in Bangkok. Popular locations for the new additions in the area were Ladprao, Ratchadapisek, and Thonburi.

BANGKOK CONDO 2H 2017 cs-02

Source: Knight Frank Thailand

 

Demand Trend

The Bangkok condominium market witnessed consecutive quarters of annual growth sales as a result of improved buying activity in the market. The average take-up rate for the entire year of 2017 jumped to 75.8%, up approximately 2% YOY, which reflected stronger sentiments among homebuyers. In 2H 2017, the market saw an average take-up rate of 76.5%, rising by 1.4% HOH. The new developments in the CBD were active, with the average take-up rate surging to 77.4%. Demand for high value units in the CBD areas with superior specifications has shown strong performance, with some developers able to sell up to 80% of their projects on the launch day. Also, it was seen that demand for top quality projects with superb locations and sophisticated specifications remain of interest, and the buyers of these properties tend to buy them for their own occupation or long-term capital appreciation.

In 2H 2017, the insatiable demand for home ownership in the city fringe and peripheral areas was confirmed in light of the extension of mass transit routes. Buyers continued to expand their interest in various locations, mainly in Ratchadapisek, Paholyothin, Ladprao, and Onnut-Bearing. Take-up rates for projects in the city fringe and peripheral were 72.5% and 79.6%, respectively.

BANGKOK CONDO 2H 2017 cs-03

Source: Knight Frank Thailand

Pricing Trend

The average selling prices of all grades of condominiums launched across the city in 2017 stood at THB 153,220 per sqm, representing an increase of 5.9% YOY. In 2H 2017 alone, average selling prices were THB 152,371 per sqm, up 16.8% HOH. Average selling prices in the CBD stood at THB 241,585 per sqm, rising 5.6% compared to 2H 2016. Nevertheless, pricing for the new development supply in the CBD was down slightly across the board when compared to the first half of 2017, with average prices declining 5.24% due to a shift in the market share of sales away from prime Sukhumvit and towards other areas such as Wireless, Silom, Sathorn, and Rama 4.

Driven by increasing selling prices of the new additions in the area, the city fringe’s average prices in 2H 2017 reached THB 131,906 per sqm, approximately 0.6% higher than 1H 2017. Over the same period, average selling prices of condominiums in the peripheral surged to THB 83,623 per sqm, up from THB 74,591 per sqm in 2H 2016. Pricing in both the city fringe and peripheral noticeably experienced annual gains for consecutive years, primarily due to higher land prices in those areas, which is the effect of new mass transit routes in the city.

BANGKOK CONDO 2H 2017 cs-04

Source: Knight Frank Thailand