Knight Frank Thailand disclosed that the condominium market in Bangkok has managed to grow in terms of supply and pricing in Q4 2015 with the accumulated supply of 386,199 units, representing a 4% increase from the previous quarter. The new supply added in Q4 totalled 14,793 units, soaring 70%, from 8,709 units of new supply launched in Q3. The total accumulated supply in 2015 went up by 17% compared to the end of 2014. Meanwhile, CBD continued to register steady growth in terms of pricing with an average selling price increasing by 1.6% Q-o-Q or 14.6% Y-o-Y to approximately 217,706 baht per square metre.
According to Knight Frank Thailand Research, the new supply in Q4 was almost double the new supply in Q3, as there were more large projects with up to 1,000 units launched in Q4. There were 57,941 units added to the market in 2015 thanks to the increasing number of new supply in Q4 by four large projects, including Life Pinklao, Plum Condo Park Rangsit (Phase 3), Plum Condo Central Station (Phase 2) and Lumpini Sukhumvit 76, which together accounted for 25% of the total new supply.
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The research also pointed out that similar to the previous quarters, most of the new supply was located in the peripheral areas. New launches in the city fringe and CBD accounted for 21% and 6% of the total Q4 2015 Bangkok supply, respectively. A drop in supply in CBD was caused by the lack of available land plots fit for development.
Despite the stimulus measures launched in early Q4, the number of sold units plunged nearly 50% Q-o-Q. This caused the accumulated take-up rate to drop slightly from 87.8% in Q3 to 86.9% in Q4. We believe that the contracted demand in this quarter reflected a real demand from end-users rather than speculative buyers, as we have previously seen in the market. The perception of the condominium market over-supply has an effect on speculators with low cold cash — many hold their purchase decisions, fearing the inability to resell their purchased units before the transfer date. Meanwhile, loan rejections facing the buyer-occupiers in the lower to middle market segment have proved to be an issue with banks that have tightened their mortgage lending criteria to diminish their downside risks. The current rejection rate is roughly 10 to 15% per project in this segment, according to Knight Frank Thailand Research.
Mr. Frank Khan, Executive Director, Head of Residential, Knight Frank Thailand Co., Ltd. pointed out that the areas near the central business area, such as Ratchada-Rama 9, Petchburi, Paholyothin and Ladprao, which boast access to the rapid transit systems, will continue to be desirable for the overall condominium market, As for condominium projects along the mass transit routes, a few projects stretching along the Purple Line must exercise caution as there is a large number of stock. So, developers should be caution with selecting a location. On the other hand, projects along the Blue, Green, and Orange Lines will have a good future as the existing stock is still low. Therefore, developers will have good prospects if they choose the right location and offer the right product and price. It is worth noting that the Ramkhamhaeng area, where the Orange Line will pass, however, falls short of proper parcels of land for development.
Ms. Potjaman Vorakitpokathorn, Director – Project Marketing, Residential Department, Knight Frank Thailand Co., Ltd. said that government measures to boost the real estate sector such as reduced ownership transfer fee, helped stimulate sales of finished condominium projects rather than newly launched supply. However, residential properties costing less than 3 million baht per unit were the segment that enjoyed sales growth as a result of such measures.
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Whilst in the fringe and peripheral areas, price levels registered only a slight increase of 0.4% Q-o-Q, representing 128,649 baht per square metre and 73,388 baht per square metre, respectively. The most impressive Y-o-Y segment is the CBD with a rise of 14.6%, following by the city fringe with a rise of 9.5% and the periphery with a 4.8% increase from last year. In addition, developers now are back in the “safe development strategies”, where they try to add value to their products with premium materials and superior/edgy design, contrasting the previous strategy, which overly leveraged the project location and rental return guarantee. The peripheral area is forecasted to see an even slower growth of the average selling price per square metre since the accumulated unsold inventory remains relatively high.
Ms. Potjaman pointed out that a good combination of location, product and price is the key factor when it comes to purchasing decision, adding that condominium buyers are young professionals and families who live an urban lifestyle and look for a condominium that offers convenience. The proximity to public mass transit routes, major roads and expressways is an indispensable factor. In addition, good online marketing can also boost sales as 40 to 50% of buyers pay visits to online marketing channels before visiting the actual site of the project and spend roughly an hour on average to make their decision.
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Knight Frank Thailand Research added, “It is expected to see many upcoming premium projects in 2016, especially in Mid-Sukhumvit. In contrast, the development plan of new condominiums in the periphery would slow to make room for existing inventories to be taken up.” In addition, 2016 is a challenging year for small to medium developers with projects in the periphery as buyers become more cautious with purchase decisions, whereas in the CBD we would see listed developers starting to differentiate their premium offerings with more emphasis on unit layouts and designs as they try to win over an even smaller pool of high net worth individuals who are still seeking to purchase condominiums.
