THE Property management arm of Sansiri Plc Plus Property Co Ltd has expressed confidence that the luxury market will maintain its growth, with a yield of investment of between 7-10 per cent a year.
According to a company survey, the luxury property market with prices over Bt10 million per unit grew an average 7 per cent per year during 2012-2018, despite the unremarkable growth of the Thai economy and the continued presence of risks to the global economy during the same period.
The response rate for luxury condominiums during 2014-2018 has been attractive, averaging at 70 per cent, according to the survey. Demand has also continually risen, due to the fact that the products are developed in a rather limited quantity compared to mainstream condominiums in the market. As a result, luxury projects have enjoyed a good response from customers with high purchasing power throughout the extended period.
The absorption rate for luxury projects stands at 15 units per project per month, whereas the absorption rate for mainstream projects stands at 22 units per project per month. These numbers point to a lower absorption rate for luxury projects, which is in line with proportionally lower supply.
However, when consideration is given to the percentage of projects that are able to sell out in less than one year, the survey found that 31 per cent of luxury projects were able to sell out. This compared favourably to the 20 per cent of 417 mainstream projects able to sell out within a year.
Another factor that contributed to luxury properties' attractiveness is their status as investments that offer somewhat higher returns. Owing to ever-increasingly prices, luxury properties have produced yields of 7-10 per cent. In areas stretching from inner Sukhumvit to Thong Lo, the yield stood at roughly 9.5 per cent.
The company’s managing director, Anukul Ratpitaksanti, said the market is maintaining its growth despite the 2019 challenges that include domestic and international politics as well as economic factors.
He said developing projects to penetrate the luxury group of buyers yields better cost-effectiveness to justify the challenges involved in procuring increasingly rare city-centre land plots, and assembling them into a sufficiently large plot for project development.
He expects 2019 to again present a vibrant scene, with new luxury properties finding their audience. These properties meet the demand of those seeking quality residences, as well as of investors and foreigners.
Although the Bank of Thailand is expected to begin enforcing its new LTV mortgage regulation starting this month, the purchasing power at the luxury level is not expected to be afflicted, particularly among foreign buyers.
The measure requires an increase in the down payment to 20 per cent, with the mortgage not exceeding 80 per cent of the price. This is a level similar to many countries, including the UK and New Zealand. Still, there are also numerous countries where the regulation on down payment calls for an even higher percentage than Thailand’s new mortgage rules. For example, the down payment is 75 per cent in Singapore, 70 per cent in Malaysia and South Korea and 65 per cent in Hong Kong. Thailand's new mortgage rules will therefore have no effect on investors from these countries, said Anukul.