NEXUS: New Launch of Bangkok Condominium in 2017 Hits New Record in a Decade with Luxury Segment Continuing to Boom.
Market Should Keep an Eye on Investment Groups and Buyers from Hong Kong, China and Japan.
– Future trend: project should apply technology to complete customer’s lifestyle and prepare for senior citizen society.
Bangkok—21 December 2017: Nexus discloses that Bangkok condominium in 2017 booms and hits a new record high with the largest number of new supply launch in a decade. The Phra Khanong—Suan Luang area remains attractive with the largest number of new project launched. The Pathumwan—Ratchathewi area sees the highest increase in prices with a rise of up to 16%. Market in 2018 will continue growing with an increase of over 10% in a number of new supply being launched. Nexus points that a future residential trend will move to a “transition” situation, being driven by various factors including an investment of foreign investors, an exponential growth of CLMV, an upcoming society of senior citizen in the country and technology influencing on new property development.
Mrs. Nalinrat Chareonsuphong, Managing Director of Nexus Property Marketing Company Limited, discloses the company’s research on Bangkok condominium market in 2017 and a new trend in 2018 that 2017 is a year that condominium developers in Bangkok face a strong competition. A number of new condominium supply launched by large and individual developers totals 62,700 units from 128 projects, hitting a new high record in 10 years. A great number of the new supply launch is derived by both large and new developers that continue developing new projects. They also develop a large number of big projects, as a result, an accumulative number of condominium supply in the market totals 550,000 units. The number of new condominium supply launch is 15% higher than an average number in the past 5 years (the average number of new condominium supply launched in 2013-2017 is approximately 53,600 units per year) and the new projects continued expanding to locations surrounding the inner city. Top 3 locations where the highest number of condominium supply increases are: 1. Phra Khanong—Suan Luang with 14,400 units or a rise of 23%; 2. Phaya Thai—Ratchadaphisek with 13,200 units and an increase of 21%; and 3. Thon Buri— Petchakasem with 8,900 units or a growth of 14%. The total number of new supply in these 3 locations accounts for 58% of the total number of new condominium supply launched in Bangkok.
About project development expansion in each location, as we may know, condominium market in the past 5 years has expanded to outer city locations. The zone where a condominium growth is the highest is Thon Buri—Petchakasem with a rise of 107%, followed by Tiwanon—Rattanathibeth (76%) and Chaeng Wattana—Pak Kret (68%) when compared with 2016.
Overall demand in 2017 continues growing. New demand or condominium sales in the market totals 57,300 units which is 14% higher than an average sales in the past 5 years (the average sales of condominium in 2012-2016 was approximately 50,400 units per year). However, a total condominium sales rate in the market stands at 90% (the accumulative sales of condominium in the market rises to 496,100 units). Currently, a number of condominium remaining for sales in the market is around 53,900 units.
In 2017, an average sales rate of new condominium launched in the market is approximately 62%. Top 3 locations where the number of condominium units sold is the highest are 1. Phra Khanong—Suan Luang 2. Phaya Thai—Ratchadaphisek 3. Pathumwan—Ratchathewi. The Phra Khanong—Suan Luang area is still a popular location with a great number of new condominium supply launched each year and a consecutive high sales rate as well. The Pathumwan—Ratchathewi area is a location where a sales rate of new condominium launched is the highest at 88%.
Source: Nexus Research, December 2017
In 2017, average selling price of condominium in Bangkok rises in a decreasing rate at 8% or from 121,000 Baht per square meter in 2016 to 130,600 Baht per square meter in 2017. This increase is close to an average increase of condominium price in the past 5 years at 9% per year. However, location where an increase in condominium price is the highest is in Pathunwan and Ratchathewi districts with a rise of 16% to 234,000 Baht per square meter as condominium demand in these locations is ver strong. Land costs are also higher while new condominium supply launched has been limited during the past several years. For condominium market in inner city locations, price rises by 12% to 210,700 Baht per square meter which is in the same direction. In Yannawa and Khlong San districts where condominium sales is good, price also increases by 12%. In Bangkok outskirt locations, an increase in price is slight at around 5%.
Source: Nexus Research, December 2017
Condominium Market Trend in 2018
Mrs. Nalinrat says a number of new condominium supply is expected to be at least 55,000 units or an increase of 10%. Locations where new condominium supply will be launched in a great number will include inner Bangkok and outer Bangkok. In outer Bangkok locations, a number of new projects being launched will be minimal but a number of unit per project will be in a great number. Condominium demand will remain strong and continues to grow in the same rate to supply, as a result, a number of condominium remaining for sales in the market will be around 58,000-60,000 units in 2018.
Price of condominium in inner Bangkok next year is expected to rise at least 11% while price of condominium in outer Bangkok locations will increase around 5-6%, as a result, an average price of condominium in the market will grow at least 8%.
In 2018, the market will see a development trend of condominium with seven-to eight-storey building in all segments in small soi in a great number as land plot on main road are very rare and land price will continue soaring connectively. Categorised by condominium movement in the market, there are 5 condominium segments: 1. Super-luxury 2. Luxury 3. High-end 4. Medium-end 5. City condo.
In super-luxury and luxury segment, large and new developers continue interested as they were. Price will continue rising while buyers will extend to international markets. Foreign buyers buy for an investment and as a second home. The entrance of foreigners is not only as a buyer but also an investment partner. Investment partners from overseas can build confidence among buyers as well.
In high-end segment, majority of developers will remain large firms that can buy land plots near the mass transit lines in inner city. However, with price of condominium in this market, buyers are limited. In medium-end condominium market, project will remain in locations surrounding inner city and near the mass transit lines. This market is where most of buyers have stable income and really need a residential unit. Developers need to develop products to match their lifestyle of people in this segment. In city condominium segment, price remains a key factor that people in this segment consider before making a decision. Developers in this segment should manage cost to make an affordable price. They should also consider customer’s payment condition and a monthly payment with banks which should affect buyer’s expenses as slightly as possible.
Property Market Trend and Forecast in Medium and Long Term
Mrs. Nalinrat forecasts a residential market trend in a short and medium term that forecasting a future trend of property market should be considered mainly from GDP forecast which the government estimates 4% for 2017-2020. This figure will likely suggest a good growth of economy in each sector. For property sector, we should consider internal and external risk factors which will significantly affect the property market growth. Those factors include an economic development in neighbouring countries as CLMV countries in the next decade will likely develop to compete with Thailand. When they are developed and have opportunities to grow consecutively, inbound investment which used to flow to Thailand will turn to the neighbouring countries. Foreign buyers that are interested to buy Thai property may slow down as they have more choices of investment in the neighbouring countries. For internal factors, Thailand in the next few years will enter to a senior citizen society which will affect residential supply that needs to change to support a lifestyle of senior people. Disruptive technology is another issue which will definitely influence on residential market. With all of these issues, we can summarise into 3 trends: investment, living and location.
Trend 1: Investment — We are seeing developers shifting to develop a leasehold project on a potential large land plot owned by government agencies. Developers develop a mega project with a mix-use concept. Buyers are also interested in a leasehold project as it offers a lower price. We will also see mixed-use project development as it can diversify risks in property development and minimise business competition. Foreign markets will continue playing a key role in term of big investment and individual investment. Overseas firms are interested in a joint venture with Thai developers including large and small ones in many projects. They tend to bring in fund and technology to co-develop projects. Foreign investors that are interested in a joint venture development are from many countries including Japan, China and Hong Kong. At the same time, there is an increasing number of individual investors from overseas countries to buy a unit as a long term investment and for rent.
Trend 2 Living in the future — The demographics of Thailand tends to be a senior citizen society, as a result, there comes senior home or elderly care market to meet demand in Thai society and develop products consecutively. Being accepted by Thai consumer and adjusted with their lifestyle is a challenge for this product. As technology abruptly comes into people’s lifestyle, developers need to develop residential project to keep up with this change like home with technology. There are also a house where people can really live like a small unit but in a project with a large common area, a sustainable house with quality of construction and finally an environmental-and social-friendly house where resident feels relaxed and can live in a long term.
Trend 3 Location — Location remains a key factor that indicates a living trend. Attractive locations for condominium can be categorised in 3 main groups. Inner city location will be set to be a node like Phrom Phong to Thong Lo area which is a center of luxury lifestyle where high-end condominium and house as well as tourist attractions, chic restaurants are located. There are also the new central business district in the Ratchada—Rama IX Intersection, the center of old town districts in Yaowaraj and Choroen Krung and the center of luxury residence like Lang Suan and Phloenchit. Location 2 is location near mass transit lines. This locations should be considered as a good development of mass transit system will affect property growth. The most attractive location is Bang Sue as the government are attempting to develop it as a Transit Oriented Development (TOD). Locations near an extension of the Green Line, the Yellow Line and the Orange Line are also interesting. And final is riverside location including Charoen Nakhon and Charoen Krung which will become a new hub of shopping and lifestyle.
Property growth is a chain growth with a cycle that links all in the system. A change in economy, society, culture and technology that develops very fast in the country and the world is what developers should be concerned about.