Bangkok--Jun 23--CB Richard Ellis
Thailand’s strengthening residential condominium market has been attracting more investors from both local and international markets, according to international property consultants CB Richard Ellis.
Demand for residential condominiums for investment or owner occupation continues to be strong, particularly among those projects located in the Central Business District (CBD) or along BTS and MRT routes. The rise in demand has been seen in all types of residential condominiums, from small studios to four bedroom units and penthouses, both grade A and grade B developments.
The market has been indicated positively by the consistently strong expatriate rental market, as well as a continuing increase in occupancy levels among existing condominium projects. The average vacancy rate among freehold condominiums in downtown Bangkok has fallen from almost 50% in 1998 to only 10.5% as of the first quarter of 2005.
According to the latest survey conducted by the Bangkok research team, the total stock of existing condominiums in Bangkok was 39,515 units, as of the first quarter of 2005. This figure can be sub-divided by area, with 21.1% in the CBD’s Sathorn area (Silom, Sathorn, and Suan Plu Roads), 8.8% in Central Lumpini (Wireless, Ploenchit, Langsuan, and Rajdamri Roads), 34.4% in Sukhumvit (Sukhumvit Soi 1-63 and Sukhumvit Soi 2-44), 8.8% in Pathumwan (Phayathai and Phaholyothin Roads), and 26.9% in Riverside (Rama III, Charoen Krung, and Charoen Nakhon Roads).
The survey also shows that 83 new condominium projects, with 14,093 units, were launched during 2003-2005 and are due for completion in 2005-2008. Of this future supply, 63% are located in the CBD’s Sathorn and Sukhumvit areas. Almost 70% of the future supply are already sold, with most of the demand coming from both end-users and long-term investors.
CB Richard Ellis believes that the condominium sector in downtown Bangkok has become much more globally focussed. There has been a tremendous improvement in design and product quality, enabling Bangkok condominiums to compete with those in other major cities around the world. The Company has also noted changes in lifestyle as younger Thai generations have shifted gradually from living in single detached homes to condominiums. This trend is most noticeable among white collar workers.
According to Ms. Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis (Thailand) Co. Lid, prices have been rapidly increasing, since the recovery period in 2002. The current prices are already higher than those during pre-crisis, and have appreciated by 20%-50% over the past 3 years. This has been demonstrated by prices of grade A condominium projects in the CBD‘s Sathorn area, which in 2002 were 65,000-70,000 baht per square metre, and are now 85,000-120,000 baht per square metre.
In comparison with other countries in the region, prices for grade A condominium projects in Bangkok are much cheaper. On the average, the prices for grade A condominium in Hong Kong, Singapore, and Shanghai are 840,000; 300,000; 100,000 baht per square metre consecutively. The average return yields in these cities are as follows: Hong Kong 1.5%, Singapore 3%, and Shanghai 4%-6%. The latter city has the same level of return as what condominiums in Bangkok achieve. However, the condominiums in Bangkok have a superior quality in terms of layout, specifications, and facilities than projects in Shanghai. Therefore, this is one of the key factors which are attracting more foreign investors to buy condominium units in Bangkok.
Foreign purchasers looking at owning condominium units in Thailand are permitted to buy freehold condominium units. However, the foreign ownership should not exceed 49% of the total saleable area of the condominium, and the purchase must be in cash. Banks in Thailand do not usually provide mortgages to non-residents or foreigners who do not hold permanent resident status. However, some banks have started to lend to customers at their overseas branches.
A number of long-term investors are keen to invest in condominium properties in Bangkok because of the active resale market, which has a high potential for capital appreciation; the strong rental demand in case they rent the units out; and the low cost living environment. The investors, particularly from overseas, are also looking at a very good lifestyle at a much lower cost, comparing to other major cities.
CB Richard Ellis conducted a survey of condominium purchasers’ profiles, based on a sample of 1,249 units, and found that 7% are looking for 1 bedroom units, 49% for 2 bedroom units, 33% for 3 bedroom units, and 8% for 4 bedroom units, and 3% for penthouse units. The top 5 nationalities of foreign investors are British, American, Singaporean, French, and from Hong Kong, accounting for 17%, 15%, 9%, 8%, and 6%, respectively.
At present, supply in the residential rental market is increasing at a slower pace of 1%-2% per year, compared to the number of expatriates, which continues to grow at 10-13% per annum. Therefore, condominium units have great potential to serve the strong demand in the market.
Ms. Aliwassa said, “With sustained return yields of 4%-6% and impressive historical capital gains, acquiring condominium units in prime locations is proving to be an increasingly popular and attractive investment choice for Thai and foreign investors,“ concluded Ms. Aliwassa.
About CB Richard Ellis
CB Richard Ellis (NYSE:CBG), a FORTUNE 1000 company headquartered in Los Angeles, is the world's leading commercial real estate services firm (in terms of 2004 revenue). The company serves real estate owners, investors and occupiers by offering strategic advice and execution for property leasing and sales; property, facilities and project management; corporate services; debt and equity financing; investment management; valuation and appraisal; research and investment strategy; and consulting. Including partners and affiliates, the company has over 300 offices in more than 50 countries around the world.
CB Richard Ellis established an office in Bangkok in 1988 and in Phuket in 2004. CB Richard Ellis (Thailand) Co. Ltd. has grown to be a leading real estate services provider, offering a full range of services including sales and leasing for all types of property, property and facilities management, valuation and advisory services, and research and consulting. For more information, visit the company's website at www.cbre.co.th.
* Includes partner offices
For further information:
Ms. Aliwassa PathnadabutrManaging Director02 654 1111 Ms. Ngamjai Jearrajarat Corporate Communications Manager02 654 1111 Ext. 522 End.