Real estate firm JLL expect more of the same for the property market in 2017.
Data released from real estate firm JLL has said that 2016 was a good year for the property market in Bangkok. The commercial segment had a good balance between demand and supply which kept occupancy rates high and pushed up rents. The luxury market continued its momentum as the thirst for the upper tier of the residential market remained strong.
Suphin Mechuchep, managing director at JLL, commented, “We are entering 2017 with new challenges and opportunities for the Bangkok real estate market. There are a number of factors that may both positively and negatively affect real estate such as the government’s push for infrastructure projects, the introduction of the land and building tax, continued rise in land prices, and global political and economic uncertainty.”
Over the course of 2016 some of the capital’s premier office spaces achieved rents in excess of THB 1,000 per square metre. This included Park Ventures Ecoplex which connects to Ploen Chit BTS Skytrain station. Average rents have been at record high numbers and there has been strong demand for new projects.
Luxury makes good headway.
As the residential market shifted due to rising household debt and increasing mortgage rejection rates, developers started to alter their strategies. Reputable developers such as Sansiri, LPN, Ananda and SC Asset focused on the upper end of the market. Launching a number of new of projects concentrated in the popular parts of Bangkok including Chitlom, Phrom Phong and Thong Lo. These developments have achieved impressive values around the THB 300,000 per square metre mark equating to record year-on-year growth since mid 2015. This supply is not expected to slowdown anytime soon. In fact, JLL anticipates for it to increase five-fold in the next four years.
Infrastructure development.
The growth of Bangkok’s infrastructure network is expected to influence the condominium market going forward. The MRT Pink line, MRT Yellow line and MRT Orange line will help open up suburban areas as the construction of these lines are due to commence mid way through this year. Developers are expected to continue to snap up land in vicinity of the mass transit network.
As land being squeezed, developers are having to turn to leasehold sites in place of freehold sites.
“Historically speaking, real estate developers and investors have exhibited a strong preference for freehold land, particularly in the residential sector. As available prime freehold land is scarce, developers are increasingly seeking out prime leasehold development sites,” says Suphin.
This move will be reinforced by the announcement of new land and buildings tax scheme. To avoid taxes, some property owners may opt for long term leasing. This will increase the number of leasehold developments. This is coupled with the increasing land prices that can pose problems among property players. JLL estimates that the average land price in Bangkok has grown between five and ten percent every year over the last several years. Values that are predicted to rise further.
