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Friday, February 3, 2023

NEXUS guides how to sustainably develop condos in Bangkok

NEXUS Property points out land price, location and urbanization expansion are key factors that make condominium price higher. Foreigners who buy condominium for long-term investment may stimulate demand in the short term. However, developers are suggested to focus on Thai clients who buy condominium for their living and do research to see the real demand of consumers before developing projects.

Mrs. Nalinrat Chareonsuphong, Managing Director of Nexus Property Marketing Company Limited, said NEXUS has continuously gathered the information of condominium market over the past years, and found that the growth rate of supply was around 10 percent on average and the price increased 8-12% per annum. The key factors that raised the condominium price were the surging of land price and scarcity of land. Developers need to consider those changes carefully when developing their projects in order to sustain the market’s growth in the long term.

For the overall picture of condominium market in Q2/2018, NEXUS found that the supply in Bangkok increased by 9,395 units from 20 projects, resulting in 573,000 units in total. The locations that attract a lot of new projects are Charansanitwong and Saphan Khwai, the surrounding area of the city’s center.

During, the first half of 2018, the average price of condominium market increased by 5 percent to 137,100 baht per square meter in the first half of this year. However, the city’s center marked the highest increase by 6 percent to 223,000 baht per square meter. The surrounding area of the city’s center surged by 4 percent to 110,000 baht per square meter and the outskirt of Bangkok increased by 3 percent to 75,000 baht per square meter, respectively.

Over the past years, condominium demand in Bangkok came from Thai people, of whom 80 percent bought for their own living. However, it found that demand from foreigners have increased during the last one to two years. Via real estate agents, those foreigners bought for either short or long investments and expected the annual return from rental income together with capital gain. However, rental rate in Bangkok market was increased marginally over the past few years in comparison to condominium price. Therefore, in the long term foreign investors may looking for long term gain from price increase as rental income may not be so high. In addition, The foreign quota of 49% may only be filled to certain projects hence developers should remain focus on Thai market.

There have been several changes in condominium market over the last seven to ten years, including 1) Location. Condominium market has been developed along with the expansion of urbanization and transportation. Interestingly, supply in two outer locations have drastically surged. One is Thonburi-Petchkasem area which was reported 66,000 units in Q2/2018, up from 13,000 units in 2011. The other is Ngamwongwan-Tiwanont area which was reported 73,000 units in Q2/2018, up from 17,000 units in 2011.

2) Room size. Condominium units are designed to be much smaller over the past ten years, for example, one-bedroom units with the space of 65 square meters, downsized to only 28 square meters. Meanwhile, two-bedroom units which used to have the space of 120 square meters currently have the space of only 45-48 square meters.

3) Room mix. The proportion of units in one project is obviously different. Several years ago, two-bedroom units and three-bedroom units would take up most proportion and one-bedroom units would account for only 20-30 percent. But currently, one-bedroom units make up for most proportion for developing each project. It is very rare to see three-bedroom units in new projects. Smaller size of units also result in more units in one project, for example, developers used to build 300 units on two- rai land plot but it can be built upto 500 units on the same size of land nowadays. This is also a reason why supply in condominium markets have drastically surged over the last few years.

4) Price per unit. For the mid market and the city condo market, the price starts around 1.5 million baht to 3 million baht per unit. This price range accounts for over 70 percent of total units in Bangkok’s market. However, the price per unit is controlled by buyers’ solvency. This causes developers to adjust their development’s cost in line with the selling price per unit. Due to the rising of land price, the development has moved out farther along with the future development of mass transit routes or moved into small alleys to build 8-storey condominiums instead.

According to the income analysis of working people in Bangkok, it found that the monthly income of those who are officers are not over 35,000 baht so they can buy a one-bedroom unit of city condominiums in the price range of not over 2.5 million baht. Meanwhile, those whose salaries are not over 65,000 baht per month can buy a unit in the mid market. For the hi-end market, buyers would be at least in the manager level, or have the income at least 120,000 baht per month. For the luxury and super luxury markets, buyers would be business owners and senior executives only. Condominium price has increased 7-8% per annum for many years, which is higher than the income growth rate of some working people in Bangkok. Despite the higher price, they have a chance to buy but they may get a smaller-sized unit in the same location or the same-sized unit in the farther location.

“In conclusion, the sustainable growth of the condominium market in Bangkok needs to mainly depend on Thai buyers and be supported by foreigners whose aim is to make a long-term investment from the rising price of condominium. The rental fee should be a secondary objective that makes investment more attractive. In the mid-or long-term, Bangkok’s condominium market will continuously spread to its outskirt as more people can work from home and workplaces keep growing in the surrounding area of the city’s center such as Rama 9, Bangsue, Phahonyothin and Ratchadapisek. In addition, the second-hand condominium market in the city’s center will also grow due to its lower price than the first-hand market. We won’t probably see the large-sized units in Bangkok in the next one to two years as same as other big cities such as New York and Tokyo,” said Mrs. Nalinrat.

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