Mr. Nattha Kahapana, Deputy Managing Director and Head of Knight Frank Phuket Operations, Knight Frank Thailand Co. Ltd., said that, the condominium market in Q4 2021 showed more movement on the supply side. Previously, new project launches slowed throughout the year, but this quarter, developers started selling more of their projects. This can be attributed to the government’s more relaxed measures, including the cancelling of the lockdown and the opening of the country to tourists, particularly the reduction of the quarantine duration using Test & Go.
In addition, the Bank of Thailand temporarily eased the LTV ratio until the end of 2022, which positively affects investors and homebuyers who benefit when applying for a mortgage or loan. Developers thus view this as a suitable time for launching new projects. Although the overall condominium market in Q4 showed signs of improvement, the Omicron variant of Covid-19 has forced developers to adapt strategies according to the situation, to capture real demand, which is the source of most of the purchasing power in the market.
Supply
As of Q4 2021, the supply of condominiums in Bangkok included a total of 11,252 units. The number of new units sold increased by 62.7 percent compared to the same period last year or by 79.5 percent compared to the previous quarter. In 2021, almost 56 percent of the total supply of 20,015 units remained. Of the newly launched units, 76 percent or 7,117 units were in the suburbs. The City Fringe and Central Business District )CBD) areas accounted for 13 and 11 percent, respectively. Up to 70 percent of the newly launched supply was from the large-scale developers; the rest included projects by mid and small sized developers.
New condominiums launched this quarter were priced in the range of 0.9 to 3.5 million baht. If classified by grade, it was found that 63 percent were grade C condominiums and 37 percent were grade B condominiums, indicating that developers chose to sell condominiums at the average price of approximately 80,000 to 100,000 baht/square metre; such products are targeting the group with the most purchasing power during this period.
Demand
In Q4 2021, Thailand experienced a serious wave of the Covid-19 epidemic and the government’s recent acceleration in vaccinations has resulted in the reduction of deaths and severe cases to be below the critical point. This helped economic activities, including the condominium market, pick up as developers have gradually returned to launch more new projects. The number of new units sold in the quarter was 2,835 units from the newly launched supply in Q4 of 11,252 units, representing a sales rate of 25.2 percent. The sales rate decreased 8.0 percent when compared to the previous year and by 12.8 percent compared to the previous quarter. The decrease in the sales rate reflects the high number of newly launched units while the number of units sold dropped due to the projects that only booked pre-orders.
Even if few units were sold, they reflect actual units whose sales would not be cancelled, as projects more closely assessed potential customers. As a result, the amount of loan rejections may decrease in the future. Most buyers possess moderate purchasing power with stable income. There are more such buyers than investors, as the projects that launched for sale are in the suburbs, which are main residential areas. This group of residential buyers have real demand, and they are interested in and ready to buy, especially units with a price level of not more than 3 million baht.
Asking Prices
The asking price of condominiums in Bangkok as of Q4 2021 decreased in all areas from Q3 2021. The asking price of condominiums in the CBD stood at 239,689 baht per square metre, a decrease of 4.6 percent compared to the same period last year or 0.4 percent compared to the previous quarter. The asking price of condominiums in the City Fringe was 115,659 baht per square metre, reflecting a decrease of 6.3 percent compared to the same period in the previous year or 1.1 percent compared to the previous quarter.
The asking price of condominiums in the suburbs of Bangkok was 63,258 baht per square metre, a decrease of 8.2 percent compared to the same period last year or 2.1 percent compared to the previous quarter. Prices in Q4 2021 decreased because some projects have been available for sale for a long time and they have not been able to close the sale phase, resulting in their having to lower asking prices along with offering various promotions. Alternately, some projects have reduced their prices in accordance with the drop in transfer and lending fees for units priced no more than 3 million baht, which is still an active market segment. As a result, such initiatives have helped to partially lower the stock of unsold units.
Outlook for 2022
The condominium market throughout 2021 will be quite a heavy year for condominium developers. Compared to the year 2020. Due to the Covid-19 epidemic and the large number of infections, the government announced a lockdown that affected all sectors of the economy.
For 2022, the condominium market is likely to recover gradually and become more active, as large developers plan to launch more projects. It is estimated that there will be an average of 10,000 new units launched. In Q1 2022, however, the outbreak of the Omicron variant of Covid-19 remains a risk factor. If it is indeed severe, resulting in a significant rise in deaths and serious cases, the government could reinstate a lockdown order. Inflation poses another risk factor, increasing the prices of consumer goods, including the prices of construction materials, during an economic slowdown. For the real estate market, the government has implemented measures to support and stimulate purchasing power, such as reducing and extending the validity of transfer-lending fees. This helps activate buyers with real demand, which is a group that continues to have the most purchasing power during this period.
Overall, asking prices tend to increase as the cost of development, including land prices and costs of construction materials, starts to rise. In 2022, many projects may launch for sale at higher prices per square metre. Also, if such projects are in good locations, there will be fewer opportunities for buyers to bargain. Despite the higher selling price, however, the right development model and location can still pique buyers’ interest. The residential housing development approach in 2022 is expected to include design that provides more privacy and focuses on health, including the use of technology that makes life easier.
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