Demand for upscale condominiums remains strong in Bangkok despite the country’s slow economic growth. Buyers in this segment have been affected less by the economic slowdown, according to property agency DTZ Debenham Tie Leung (Thailand).
Developers are once again resuming condominium development in the CBD. This is after delaying the launch of many projects during the last quarter of 2015. The delay was due to developers looking to focus on selling existing condominium units, which was supported by property tax incentives. The tax incentives were introduced on 29 October 2015 and lasts until 28 April 2016 and comprised a reduction in transfer and mortgage loan fees from 2% and 1% respectively to 0.01%.
Amidst the concerns of rising household debt, many developers have shifted from the mid-range and entry level segments to put their investment in upscale condominium developments in order to avoid the risk of surplus supply. Upscale condominiums continue to perform well in the capital’s central business district as potential buyers in this segment continue to have ready capital and are keen to further increase their property portfolios.
Upscale condominiums can be categorised in two segments: super luxury and luxury projects. These properties represent 24.6% of the total condominium supply in Bangkok’s CBD market. Super luxury condominium units are more spacious than average units in the market and typically have two bedrooms. The starting unit selling price is above THB 10 million, whist the average unit selling prices are above THB 250,000 per square metre. Luxury condominiums are a lifestyle product and also a long-term investment as the unit sizing usually starts from one bedroom units. The starting unit price ranges between THB 5 to 10 million, whilst the average unit selling price should be between THB 170,000 to 250,000 per square metre.
Statistics from DTZ Debenham Tie Leung (Thailand) show that the upscale condominium market in Bangkok has continued to grow. The cumulative supply of upscale condominiums as of Q1 2016 was 17,306 units, representing an increase of 6.86% over the total condominium stock at the end of 2015. There were 1,111 units from three upscale condominium projects added to the current stock, including Na Vara Residence (97 units), Ashton Silom (428 units), and Noble Be19 (586 units).
The outlook remains bright for the upscale condominium segment. The majority of upscale condominiums were supplied in Sukhumvit locations, accounting for 8,194 units, or 47.3% of the total stock. Sukhumvit is the most popular location for condominium development since it is a known residential area for Thais and expatriates alike. The supporting facilities and amenities in this location are considered attractive and convenient for the residents. There are many established shopping malls along Sukhumvit, including the luxury malls such as Emporium and EmQuartier. There are mid-tier malls such as Terminal 21, and many community malls in areas such as Thong Lor. A great number of international hotels are also located along Sukhumvit such as Sheraton, JW Marriott, Landmark hotel and the Westin hotel. Sukhumvit is well connected to Bangkok’s CBD by roads and mass transit networks.
Silom-Sathorn continues to also be popular, having a total supply of 4,488 units, or 25.9% of the total stock. These locations are in close proximity to the core commercial areas of Bangkok’s CBD. This is followed by Central Lumpini, accounting for 3,525 units, or 20.4% of the total stock. There are only 1,099 units, or 6.4% of the total stock located in the Riverfront area.
DTZ research reveals that demand for upscale condominiums in Bangkok remains strong. The total number of units sold in Q1 2016 was registered at 775 units. The take up rate was at 69.8%, increasing from 60.8% in Q4 2015. The main customer target for upscale condominiums in Bangkok is affluent Thai buyers, who need a residence in the central business district. This property also draws demand from foreign buyers, who are seeking to purchase condominium units for capital appreciation and as the property prices are lower than those in Singapore, Hong Kong, and Taiwan.
In terms of unit prices, the average selling price per square metre for upscale condominium units depends on quality, design, material specifications and location. Overall, the price of newly launched units continues to increase. The average selling prices in Q1 2016 was recorded at THB 272,770 per square metre, increasing by 9.15% y-o-y.
It is anticipated that the average selling price for upscale units will continue to increase, due largely to the limited availability of land and high cost of land acquisition in prime locations in central Bangkok. Thus, condominium developers are targeting high development standards with luxury designs, excellent quality materials and specifications.
The upscale condominium market in the capital’s CBD became a good potential market for developers with the increasing demand from both wealthy domestic and foreign buyers and investors. Leading listed property companies are expanding their investment in upscale condominium projects in the CBD to capture strong demand among high income buyers in this market.
It is anticipated that there will be a steady growth in the upscale condominium market. A total supply of 1,478 units is scheduled to be launched by Q4 2016. This includes Sansiri, which will introduce a super luxury condominium project called 98 Wireless, worth THB 8.5 billion. The project has only 77 units with the average unit selling price at THB 550,000 per square metre. Sales will officially launch upon completion, expected in October 2016.
Nye Estate will also launch Kraam, a super luxury condominium project in Q2 2016. The THB 3 .5 billion project will be located on 1-3-91 rai on Sukhumvit 26 Road. This project consists of a 29-story building, comprising 128 residential units, which are priced THB 275,000 per square metre.
Richy Place 2002 plans to develop a luxury condominium on Sukhumvit soi 3 in Q2 2016. The 32-story condominium will have a total of 377 units, which are priced THB 230,000 per square metre on average.
SET-listed developer Singha Estate PLC is scheduled to launch a new condo project at Singha Complex on Asoke Road. The project includes a 55-storey tower with 421 units priced from THB 300,000 per square metre. It will be Singha’s first high-rise residential development.
Siam Sindhorn plans to launch Sindhorn Midtown. The THB 3 billion project will be located on a 4-rai plot on Lang Suan Road next to Mater Dei School. Comprising two 29-storey buildings with 475 fully furnished units priced THB 200,000 per square metre on average for a 30-year leasehold.
We believe that the upscale condominium segment will remain active in the remainder of the year. The success of developers in upscale condominium project shall meet the purchaser expectations in terms of the location, design, and high standard services. The developers must be able to provide fully facilities and services, luxury architectural design and high quality management in the building.
Written by Ms Pornpun Chalitkriengkai, director of residential and investment at DTZ.