The performance of the condominium real estate sector in Thailand’s capital Bangkok has been mixed, depending on property type and location, according to the latest market report from consultants CBRE.
In the luxury condo market there have been significant price increases for a limited number of the best quality properties in the best locations as larger two and three bedroom units are in very limited supply.
There have been almost no new launches of larger units and the supply of built but unsold inventory is in most cases steadily being cleared, says the firm.
The biggest changes over the last three months has been in the luxury sector with prices hitting record levels. However, these levels have not been seen in every recently completed project.
In the one bedroom condominium market price performance has been more mixed. The results of some public listed developers shows that some project launched in 2010 and 2011 have not sold out.
‘Generally the best performing projects have been those closest to transit stations. In some areas the one bedroom sector is going to come under pressures from developers unsold inventory and shadow inventory from units bought by speculative buyers who want to resell before completion,’ said Aliwassa Pathnadabutr, managing director of CBRE Thailand.
The firm expects developers to become more selective about location, focussing on mass transit stations and says that the challenge for developers will be to acquire land at a price where they can still build condominiums that are within the buyers maximum budgets.
‘The choice will be to either buy cheaper land away from mass transit stations or to reduce the size of units as they try to balance affordability with usability,’ added Pathnadabutr.
At the middle and entry level of the market prices have adjusted upwards but to a less extent than in the luxury market. ‘There continues to be new launches in this sector although the absorption rate is slower compared to two years ago when many projects tended to sell out at launch. The top developers dominate this segment of the market,’ explained Pathnadabutr.
The report concludes that condominium living is becoming more widely adopted and there is still potential demand, particularly in densely populated areas where there has been limited development. As a result competition is likely to remain fierce.
Total completed supply in downtown Bangkok reached 93,593 units, up from 92,562 units, an increase of 1.1% quarter on quarter, and a 1% rise year on year. The number of units occupied by tenants or owners increased from 65,820 in the fourth quarter of 2011 to 68,436 in the first quarter of 2012, taking the occupancy rate up to 73%.
The report also shows that the total apartment supply, that is single ownership and multi family developments, in the downtown area of Bangkok was 11,787 in the first quarter of 2012, up 0.1% year on year. The occupancy rate in this sector decreased from 89.5% in the last quarter of 2011 to 86.6% in the first three months of 2012. The report says that this decline was in line with expectations that occupancy rates were artificially inflated by people seeking temporary residence following the flooding at the end of last year and would therefore fall when short term contracts ended.