Rents for one-bedroom condos in Bangkok may fall because of an oversupply, but demand for two- and three-bedroom units is still growing and pushing up landlords' yields, according to a survey by CBRE Thailand, a real-estate advisory.
The research shows that investment in those larger units could pay off even though they cost more.
Condominium buyers looking for rental yields need to understand the supply and demand for each unit type in their preferred location.
Meanwhile, Bangkok’s overall rents and sale prices for condos in downtown areas in 2013 rose for the first time in 20 years, resulting in yields remaining stable at around 5.3 per cent, CBRE Thailand said.
Rental yields are calculated by dividing the average annual rental return by the current sale price of the condominium unit. CBRE Thailand reports that in 2013, the gross average rental yield, before any deductions, was 5.3 per cent (the deductions include common-area management fees, maintenance of the interior, fire insurance, agents’ fees, void period – that is, when the unit is not rented and is between tenants – personal income tax, and household tax).
The CBRE Research team analysed condominium rental transactions in Bangkok’s three most popular expatriate rental areas (Sukhumvit, Silom/Sathorn, and Lumpini) using data from 176 transactions in 55 condominiums. The most popular type of unit was the two-bedroom condo, followed by three-bedrooms and one-bedrooms.
The area from Sukhumvit Soi 1-63 was the most popular location for rentals and achieved the highest yields at 6.1 per cent.
One-bedroom units achieved the highest gross rental yields at 6.4 per cent, followed by two-bedroom units at 5.5 per cent and three-bedrooms at 4.1 per cent.
The researchers found that the age of condominium buildings in a good location with good maintenance did not have a significant impact on rental yields. If the building is in a good location and well maintained, good yields are possible despite its age. Some older buildings have similar rental yields to newer buildings, while the unit purchase price is as much as 30-40 per cent lower.
According to CBRE Thailand, there were more transactions for newer buildings than for older ones. Popular newer buildings included Millennium Residence in Sukhumvit Soi 20 and The Sukhothai Residences in Sathorn. Units in older buildings are harder to resell than those in newer buildings.
Foreigners make up more than 95 per cent of the rental demand for luxury condos in the downtown area.
Buy-to-rent investors who understand expatriate demand can achieve gross rental yields (rental yields before any deductions) as high as 8 per cent and net rental yields of 5 per cent.