Despite the sluggish Thai economy Bangkok saw a 96 percent year-on-year increase of downtown condominium projects launches during the second quarter of the year.
But for the rest of the vast city, CBRE’s latest Bangkok Residential Marketview research report for Q2 2015 paints a particularly gloomy picture.
After launching very few midtown and suburban projects during the first three months of the year, developers returned to the market during the second quarter with more than 16,800 new condominium units being launched – a staggering increase of 116 percent quarter-on-quarter.
CBRE said it has seen only mixed results in sales of newly lunched condominium projects, with high sales rates only seen were projects have matches buyers’ expectations in terms of location, quality, design and specifications to justify the prices being asked.
The real estate firm said it believed buyers of the more successful projects in the midtown, suburban and city fringe areas were not solely end users, but a mix of speculators and buy-to-rent investor.
It also noted how many other midtown and suburban projects were struggling with sales, especially the entry-level and mid-range projects launched during the three months ending June 2015.
It added that a few midtown and suburban projects dud achieve sell-outs in a short space of time, including The Monument Sanampao and The Line Jatujak-Morchit, both by Sansiri, and the 315-unit AQ Aria by AQ Estate.
CBRE said it clearly saw that all midtown condominiums with high sales performances were located in areas along the end of the downtown sector, and in locations close to existing mass-transit stations. It said that projects located further away from the city or close to under-construction or planned mass-transit routes were experiencing difficult sales.
The pressure from the large number of midtown and suburban condominiums expected to be completed this year, coupled with lower demand as a result of tighter lending criteria from the banks has contributed to what it described as “stagnant sales” in these areas.
It said there are more than 72,000 midtown and suburban condominium units that are expected to be completed this year, and almost 32,000 units with a planned completion before the end of 2016.
As previously reported, CBRE said the risk remains as to whether speculative buyers of these units, who have only paid as little as 10 percent to date, will default if they are unable to resell before completion, and how many end-user buyers will be able to get finance from banks.
Listed developers, who can only recognise revenue once a completed unit can be transferred to a buyer, may be forced to discount in order to shift their stock and this will deter speculative buyers from purchasing new projects if they see prices are no longer rising.
CBRE said speculative purchasers are a necessary part of the condominium market because they make quick decisions, allowing developers to rapidly reach the 40 percent to 50 percent sales rate required by banks to enable them to begin drawing down project loans. Sales will be slower without speculators in the market, CBRE said,
Even though some of Bangkok’s high-end projects performed well at launch, CBRE said it finds it difficult to be optimistic about the overall sentiment within the condominium market in the city as a result of the poor economy and a general lack of confidence.
It said that many listed developers have opted to cut back on new launches for the rest of this year, and have reported lower-than-expected sales during the first half of 2015.
Looking ahead, CBRE predicts that overall sales will be slower, especially in the midtown and suburban markets. It expects to see developers using a wider range of tools, from soft discounting like free furniture packages to actually hard discounting and price reductions.
