The condominium market continues to grow due to the real demand of residents as well as from investors, according to Plus Property Co Ltd, a full-service professional property and facility management agency.
The inner Bangkok areas Phloen Chit and Chit Lom reveal an almost 80 per cent growth in demand and close to 20 per cent growth in supply, according to figures going back four years, the company says.
Over the same period, demand within the Sukhumvit area grew roughly 50 per cent and supply grew 30 per cent, and demand growth in the Phya Thai-Ratchathewi area was an astounding 570 per cent and supply growth was 240 per cent.
Condos in resort cities such as Phuket and Hua Hin continue to be driven by public infrastructure development. The resale condominium market – offering the advantages of lower prices and higher tangibility than projects under construction – is expected to become energised in early 2019 as buyers hurry their purchases before new mortgage regulations take effect, according to a press release from Plus Property on Thursday.
Anukul Ratpitaksanti, the company’s managing director, said findings from Plus’s research and strategies development division indicate that the residential market is continuing to expand. This is especially true for properties in central business districts and nearby zones that are serviced by the electric train, and where people generally prefer to live.
The expansion of the urban area and the increased coverage of mass transit have resulted in an expansion of the market for residences and its foray into several new areas. Condominium residences are in particular experiencing remarkable growth, triggering a rise in the price of land along mass-transit lines and their extension routes, which then prompt increases in the prices of new condominiums.
In addition to factors related to transportation, areas in the vicinity of the electric train also have the characteristic of becoming the commercial centre. Community malls, career hubs and other buildings contribute to heightened demand for condominiums for locating condos nearby.
Plus’s compilation of data over the four years period between 2015 and 2018 revealed that demand for the Sukhumvit location grew by roughly 50 per cent, whereas supply only grew by 30 per cent. Demand for the Phya Thai-Ratchathewi location grew by an astounding 570 per cent whereas supply grew by 240 per cent. The limited supply was due to the low number of available projects and the lack of any new project launches in certain years. For the Phloen Chit-Chit Lom zone, demand grew by an average of 80 per cent while supply grew only 20 per cent. This situation meant that demand could be expected to rise exponentially whenever a new project goes on sale.
These figures reflect how demand has significantly outgrown supply. This imbalance resulted mainly from the limited space available for developing new condominium projects in Bangkok’s inner zone and in central business districts. Despite there being high demand from potential buyers, development of new projects was difficult. To this end, resale condominium units at already-completed projects are seeing an attractive growth, due to their ability to provide solutions to the demands from those who want to live at downtown locations.
For projects in the Phya Thai, Asok and Sukhumvit zones, a condo unit at a new project has a price that is almost 10 per cent higher than one at a resale project. Within these zones, resale prices remain lofty and therefore there is less of a difference between the prices at new and resale projects, unlike the gap between prices at projects located in Bangkok’s outlying areas.
One contributing factor for the everlasting popularity of inner Bangkok condominiums is the return on investment. Capital gain and rental yield are similarly high for inner Bangkok. Projects producing returns that are higher than the average return are generally found in Sukhumvit and outer Sukhumvit areas where the total return is about 10 per cent per year, with a tendency to increase continually. It should be noted, however, that projects that recently launched within the past two to three years produced less capital gain.
It can be reasoned, then, that prices of new projects have been increasing each year. In order to profit from a price difference, an investor may need to hold the property for at least three years while accepting a rental yield of 4-6 per cent. However, overall return will eventually increase because of the forecasted tendency for an ever-increasing price level.
The expansion of urban areas and the state sector’s propagation of infrastructure and transportation projects towards major tourism cities are also important driving forces for the growth of the condominium market.
This is especially true for the Phuket zone where projects exist for the development of Phuket Airport’s third phase, the Phuket Smart City, and the transportation infrastructure. Those developments will accommodate the future growth of Phuket City. Owing to these developments, prices of condominiums in Phuket have been rising over the previous 3 years – the rise was 12 per cent, on average.
Demand for real estate in the Hua Hin locale has also been rising overall. The zone will benefit from improved transportation linkages with Bangkok in the form of a high-speed rail link and a motorway. Those transport links, coupled with the area’s existing liveability factor, drive up demand for real estate in Hua Hin.
The price of land in the 2016-2019 accounting cycle increased by almost 30 per cent from the 2012-2015 cycle. Meanwhile, prices in the resale market have also continually risen over the past five to six years. The return made from reselling a condo unit was as high as 60 per cent, while return from rent still yielded a hearty 4-5 per cent per year. Thus, condominiums in holiday hotspots remain an equally enticing choice.
“Our prediction is for completed condominium projects to become revitalised through the resale scene in early 2019, before the Bank of Thailand’s LTV (loan-to-value) reduction measure takes effect in April. The resale units present a better investment choice because the layout of the condominium and the condition of the room can be promptly inspected. As well, the units are ready for a move-in as well as ready to earn income.
“Also, developers are currently releasing special promotions, and this presents a good opportunity for people who want to purchase property before the LTV reduction measure comes into force, in order to benefit from prices that will increase in the future”, said Anukul.