Property & Real Estate
Building for the future What opportunities and pitfalls lie ahead in Thailand’s residential and commercial property sectors? We asked leading real estate consultancies for an update. Khun Suphin Mechuchep, Managing Director of Jones Lang Lasalle Thailand, shared her thoughts with The LINK. Q: Will a General Election in 2019 influence demand for commercial and resident land and property? A: While an election season is usually accompanied by a temporary increase in flow of money in the economy following pre-election promotional activities by political parties, results of the general election will be more impactful than the election itself. Nonetheless, the election will mean Thailand’s return to democracy and thus should help the country’s economic sentiment to improve. This will be good for the property sector where demand is generally dependent upon economic conditions. Investor confidence should also improve. We expect commercial real estate to be the first to benefit from the improvement in economic sentiment. Stronger business and consumer confidence should encourage business expansion which will lead to an increase of demand in the office, retail and industrial/logistics sectors. The residential sector may be slower to feel the impact because this property sector historically often lags behind overall economic performance. Q: Is Bangkok CBD becoming too expensive for residential investors? To which areas of Bangkok are YOU now directing your clients? Yes, if the investors purchase a condo for rental yields. The average selling price of condominiums in Central Bangkok has doubled since 2008 to THB 250,000 per square metre at present. Condos in ultra luxury developments are offering much higher prices, averaging THB 364,000 per square metre. While prices have jumped, rentals have risen by only 10 percent - leading to yield compression. Condominiums across Bangkok, including the central area, are now offering rental yields averaging less than three percent a year, a substantial decline from five years ago. However, ‘no’ may also be the answer to this same question if the investors expect capital gain in the long term. Many people have continued to buy condominiums in Central Bangkok as an investment. These investors are aware that prime sites or land plots that are suitable for 16
The Link
Issue 4/2018
new condominium development are increasingly scarce and expect future condominium projects to offer higher prices as development costs, particularly the cost of land in the area, will continue to rise. Outside Central Bangkok, the riverside area along Charoenkrung Road and certain parts of Charoennakorn Road on the opposite side of Chao Phraya River are where luxury condos have a potential to offer capital gain in the long term, given the fact that there remains very little land supply that is suitable to accommodate new luxury/ultra luxury development projects. The recent opening of ICONSIAM has also given a big boost to the riverside area. There are a number of exclusive flagship developments in this area, including branded residences such as Banyan Tree Residences Riverside Bangkok, Four Seasons Private Residences and The Residences at Mandarin Oriental (ICONSIAM). Q: Are the new rail infrastructure projects driving up prices beyond working families? The new rail infrastructure projects will present condo developers with new opportunities as they are opening up new corridors. But generally, we don’t expect these projects to drive condo prices up in the short term. These rail projects are extensions of the existing mass transit systems, covering areas outside Central Bangkok. Therefore, most (if not all) of the future condominium projects that will be developed along these rail projects will be in the mass market segment where an oversupply remains. Even though certain areas near these new mass transit projects, such as areas around the Bang Sue Central Station, may have a potential to accommodate high end condominium projects we don’t expect these projects to fetch the same prices as those in Central Bangkok. Q: Why is it so difficult to sell a second-hand condo (at a profit) in Thailand? Actually, the resale condo market in Bangkok has remained very active, with strong demand from buyers purchasing used units for own use. There are a number of reasons for some second-hand or used condo units being difficult to sell.
