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Bangkok's vertical
property boom
High stakes and high returns in the condo market
The Nation October 5, 2007
Property firms attract buyers by creating special events to promote their city
condominiums.
Location and convenient transportation are the two main factors that lend
advantage to condominiums located in Bangkok's central business district (CBD),
as well as those located near Skytrain or subway routes, because they save on
transport costs and slash the time taken in travelling to and from work.
On the other hand, condominiums located outside of the CBD must work hard to
attract their target buyers.
Experts in the property industry agree demand for condominium units located in
the Ploenchit, Chidlom and Sukhumvit areas is always high, and those located
along new Skytrain routes will certainly have a bright future. But those located
in the Ratchadaphisek, Lat Phrao and Phaholyothin areas could be at risk from
faulty marketing analyses, because those locations are only attractive "at a
certain level".
However, having so many condominium projects rising in the heart of Bangkok is
certain evidence that this is the golden age of the condominium, and both
newcomers and major players in the property-development industry are working
hard to take advantage of it.
Offering a modern lifestyle for families that choose to live in high-rise
buildings because of their convenience, condominiums in the CBD are enjoying a
strong market. Many new projects have benefited from high revenue. Some are even
sold out in the presale period.
However, it is not only their easy access that makes them attractive. Many
styles are unique, totally dismissing all of the old perceptions of condominium
units being limited, uncomfortable residences.
As well as those developers stirring up the current condominium trend, including
Sansiri, Areeya Property, Property Perfect, Preuksa Real Estate, Chanissara
Development, Supalai, Asian Property and Prinsiri, many others have adjusted
their business plans to join the gold rush.
Property broker Realty World Alliance has become caught up in the condominium
market. President and managing director Visit Kunatharakul says the company has
more than 200 units on its books, with prices ranging from Bt1.2 million to
Bt1.5 million, making them worth an accumulated Bt250 million to Bt300 million.
The units are from people who have already taken ownership and those who still
have loan instalments to pay for down payments, such as some units in Condo One
located in the Lat Phrao area, City Home located on Ratchadaphisek Road and
Noble Lite.
"A lot of people buy condominiums as investments," Visit says. "The prices keep
increasing at 8-10 per cent a year after purchase. This has resulted in a boom
in city condominiums, particularly those with prices in the low Bt1-million
range."
Plus Property's Research and Development Department says the company has so far
offered 61 new projects with a combined 16,933 units. It finished building 32 of
the projects, with a total of 8,786 units, in the first half of the year.
Combined with units from earlier projects, it currently has a total of 113,257
finished units - 8.4 per cent more than last year.
The company expects to finish building another 14,000 units in the second half
and plans to construct at least 47,000 more in the next year or two.
Popular room types are studio and one-bedroom types, with prices ranging from
Bt700,000 to Bt3 million. From a home-buyer's viewpoint, they offer the same
convenience as bigger units, and the prices don't bring a big burden.
However, since high demand for condominiums will cause high demand for land and
construction work, the cost of both are sure to rise. Therefore, in order to
offer the same prices in the future, developers may have to diminish the size of
individual units.
Within the next two years, there will be no fewer than 17,000 new condominium
units on the market.
The overall average price for a unit is Bt78,501 per square metre, up 10 per
cent from last year. Not surprisingly, the highest prices are in the CBD and
around Sukhumvit Road, ranging from Bt86,222 a square metre in the Sukhumvit
area (up 4 per cent) to Bt92,646 a square metre in the CBD (up 2 per cent).
In terms of price rises since construction, condominium units around Rama III
Road have appreciated most, by 30 per cent to an average Bt70,000 per square
metre, followed by the Phaholyothin Road area, where prices have risen 13 per
cent to an average Bt60,248 a square metre, and the Phya Thai area, where prices
have risen 11 per cent to an average Bt83,377 a square metre.
In the wider picture, prices of units in
mid-range condominiums have climbed to almost Bt100,000 a square metre, while
prices in high-end condominiums have increased to B200,000 a square metre.
"Prices of condominiums that are located along Skytrain routes have risen
continuously, because of increasing demand. Normally, prices rise at a rate of
5-7 per cent above the original. Some projects even witness increases of 10-20
per cent," one source said.
Condominiums that are located along Skytrain routes but not in the Sathorn,
Silom or Sukhumvit areas, as well as those that are located near shopping
centres, have a big potential for price increases to Bt100,000 a square metre.
They have high original and resale prices, because of demand from Bangkok
residents, people from up-country and foreigners, all looking for a conveniently
located home.
Meanwhile, prices per unit for high-end condominiums, starting with those
located around Soi Langsuan and Wireless, Rajdamri or Sathorn roads, will
continue to rise to starting prices of Bt200,000 a square metre.
The high demand has created a burgeoning market for investors who buy units for
resale or rent. They sometimes buy many units in projects in good locations and
either wait for the best time to sell or make money in the long-term from
renting. Good locations will always give a good return, regardless of the
country's economic situation. The chances of doubling an investment are high.
For example, the Pathumwan Resort condominium, which was launched in 1997 and
priced at Bt42,000 a square metre, suffered a price drop that year to only
Bt35,000 a square metre. Today, its prices have increased to Bt70,000 or
Bt80,000 per square metre.
CB Richard Ellis (Thailand) managing director Aliwassa Pathnadabutr says that
over the past five years, her company has witnessed increases in prices for
condominiums reaching 30-50 per cent. In 2002, the average price for a
condominium on Sathorn Road was Bt58,100 a square metre, while today it is
Bt108,000. In that same year, condominium units in the Sukhumvit area cost
Bt49,000 a square metre, but today the figure averages Bt88,000.
Prices for condominium units even increase while they are being built. In the
early construction period, prices will rise 10 per cent over the developer's
original figure. During the middle construction period, the price rises
accelerate to 15-20 per cent and they reach their peak when construction is
nearly complete. Then, the appreciated prices become the "standard" prices for
future reckoning.
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