Condo in CBD areas promise handsome returns
Many investors making big gains from sharp rise in prices; returns better than bank deposits
Ayutt, a 35-year-old architect who four years ago bought two condominiums in Bangkok - on Sukhumvit 23 and Ekamai soi 5 - managed to sell his rights to the former property in 2011 prior to transfer for a profit of 50 per cent, while seeing the value of the other asset continuing to rise sharply.
Having made an original down payment of Bt200,000, he sold the booking agreement and down payment on the Sukhumvit 23 condo for Bt300,000 within two years of reserving the property.
Meanwhile, the value of his condominium on Ekamai soi 5 has risen significantly from the Bt90,000 per square metre, or Bt4.05 million in total, he paid for the 45-square-metre unit four years ago.
Resale prices at the project are now between Bt130,000 and Bt150,000 per square metre, which means if he were to sell now, he would make a profit of 44-66 per cent.
"I decided to buy condominiums in the central business districts because of the ease of transportation and rising project values due to supply in the CBDs being limited. I bought for the purposes of both living in a condo and investment, as investing in property generates a better return than depositing money in the bank at a time when 36-month fixed deposits offer an annual interest rate of only 2.6 per cent," he said.
According to a survey conducted by The Nation this week on the resale of CBD condominiums launched in the past five years and completed last year, prices have generally risen by between 20 and 50 per cent, and by even more in some areas.
For example, Ivy Thonglor offered a starting price of Bt113,600 per square metre three years ago but now has resale prices of between Bt155,308 and Bt170,000, depending on the floor and location, representing increases of between 36 and 49 per cent.
Alcove Ekamai soi 5, which recorded a starting price of Bt90,000 per square metre five year ago, now offers resale prices of between Bt120,000 and Bt140,000 for a gain of 33-55 per cent.
The Met Sathorn, meanwhile, which had a starting price of Bt95,000 per square metre five years ago, now has average resale prices of Bt130,000 and Bt150,000, up by about 30-50 per cent.
The Address Chidlom, which had a presale price of Bt102,000 per square metre in 2007, is now seeing resale prices of Bt130,000-Bt140,000, representing gains of 27-37 per cent.
The Park Chidlom, which previously had presale prices in the range of Bt95,000-Bt110,000 per square metre, now witnesses resale prices of Bt140,000-Bt160,000, for rises of 45-47 per cent.
Oriental Residence condos started at between Bt130,000 and Bt160,000 per square metre when the project was launched two years ago. The project has succeeded in selling about 85 per cent of its 193 units, and the developer has hiked the sale price to Bt230,000 after adding value through fully finished residences.
Limited locations, strong demand fuel prices
Condominium prices in the capital's Wireless Road, Sukhumvit Road and Sathorn Road CBDs have risen due to the limited locations available for further condo development in the areas when compared with the demand from both local and foreign buyers who want to live close to the mass-transit system.
Others CBD locations such as Ratchadaphisek, Pathum Wan and Lat Phrao also show high demand with resale prices increasing more than 10 per cent, according to a survey by the Agency for Real Estate Affairs (AREA).
Given the high demand for homes in CBD areas located near the Skytrain and underground rail networks, the resale prices of homes in projects have been boosted, while the number of residential projects launched in these locations has risen from the level seen two years ago.
For example, the price of a condominium in the CBD area averaged Bt68,896 per square metre back in June 2004. That had gone up to Bt98,817 as of the end of last year, representing an average annual increase of four percentage points.
Meanwhile, prices on Sukhumvit rose by about 11 percentage points a year over the same period, from an average of Bt28,662 per square metre to Bt63,000 in seven years, according to the AREA survey. Residential prices rose after work on the Skytrain extension to Sukhumvit 107 was completed.
The location saw the sale of 2,387 condominium units in 2011.
Condominiums on Ratchadaphisek, Lat Phrao, Din Daeng and Phya Thai recorded an average price increase of 10 percentage points a year during the same period, rising from Bt37,466 per square metre to Bt75,600. Last year, residential projects with 3,156 units were launched at these locations.
A condo for living or investment?
Prices for existing condominiums are, however, still lower than for new condo launches, as a result of which most home-buyers opt for the former if they are looking for somewhere to live rather than for investment purposes.
Investors, meanwhile, continue to buy units in new condominium projects in the expectation of generating a profit in the future.
"Many home-buyers who want to live in their property also continue to buy in new condominium projects because the smaller condos now on offer match market demand. Some locations offer prices of no more than Bt3 million per unit for usable space of up to 30 square metres. This is lower than existing projects that offer prices above Bt5 million per unit because they have a larger usable space," said Pumipat Sinacharoen, managing director of residential-property agency Bangkok City Smart Co.
He said that when you buy a condominium before construction of the project is complete, a saving of 10-20 per cent can be made when compared with the price of a unit in a completed project.
If in about one and a half to two years, depending on the project site, you sell the condo after the project is complete, a return on investment averaging 5-10 per cent a year will be generated, significantly better than if the money were deposited in the bank.
Meanwhile, if you did not sell but opened up the property for rental, the return on investment would average 5-7 per cent a year, depending on the location, he added.