Bangkok residential capital values fall as developers offer massive discounts on new units | Realestate Asia
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Bangkok residential capital values fall as developers offer massive discounts on new units

The average market capital values are now below THB 127,000 per sqm.

Condo purchasing sentiment remained weak in 1Q21, says JLL. Deep-pocketed end-users continued to be the key source of demand in the quarter. Most first-hand units sold in the quarter were larger two-bedroom and three-bedroom units. Developers had to combine smaller units into one large unit to serve the needs of this buyer group. The unsold rate grew to 5.0%, the highest level since 2001.

According to JLL, demand in the rental market was still limited as the number of new expatriates did not increase significantly in the past year. Long-time expatriates remained the key source of luxury rental demand in Bangkok. Both buy-to-let condominium units and single-owner multi-family apartments continued to compete for a small pool of renters.

Here’s more from JLL:

Around 2,000 prime-grade condominium units completed in 1Q21, driving the total stock to near 68,300 units. Scope Promsri and Noble Form Thonglor were the only two newly launched projects in 1Q21. Both projects had an average selling price between THB 200,000 – 250,000 per sqm. Many developers chose to postpone their new launches until the market sentiment improves.

Quartz Residence and Tate Thonglor were the two single-owner multi-family apartment projects completed in 1Q21, the first new completions since 2018. Total apartment stock grew to near 4,700 units. Vacancy for luxury apartments reached close to 10.0% with over 460 units left vacant in the market.

Discounts on new units leads capital values to fall

The second wave of COVID-19 in 1Q21 has prolonged the downturn as purchasing power and investment sentiment remained low. Many developers continued to offer 20-30% discounts on their unsold inventory from the original price tags, pulling the average market capital values below THB 127,000 per sqm.

Condominium net effective rents fell to THB 480 per sqm per month as owners struggled to fill their buy-to-let units. Income uncertainty and employment instability still hindered positive growth in the luxury rental market. Apartment net effective rents grew slightly in 1Q21 following two new completions, yet the average rents were still below THB 300 per sqm per month.

Outlook: Investment and speculative products likely to remain unsold

Developers should continue to focus on clearing unsold inventory in projects with strong selling points, and putting less marketing efforts or delaying projects that underperformed. Projects that should continue to sell are those within walking distance to the train station, built with long-lasting high-quality materials, and designed to capture end-user demand.

Many compact units in high-density projects that were built to capture investment and speculative demand should remain unsold through the downturn, unless they are heavily discounted. We expect to see developers converting and combining some of these units to create a larger unit type, hoping to attract real end-user demand in the current market condition.

Note: Bangkok Residential refers to Bangkok's high-end and luxury residential market.

 

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