Bangkok Condominium in Recuperation Mode
CBRE, a leading international property consultant, reports that with waves of uncertainty and financial stress crashing into the market from the COVID-19 pandemic, most residential property developers have decided to postpone their plans to launch new condominium projects and focus on clearing their existing inventories, especially from completed projects to generate quick revenue as financial lifeboats.
Mr. Rathawat Kuvijitrsuwan, Head of CBRE Research and Consulting, Thailand, states, “In the first half of 2020, the Bangkok condominium landscape was gloomy with fewer than 10,000 condominium units launched, which was much lower than the total number of new launches in the past three years of more than 60,000 condominium units per year. Nevertheless, after the government has eased the lockdown measures on 3 May 2020, business activities gradually recover, and a few developers started to launch new condominium projects.”
The first batch to return is focused on end-user budget buyers who are seeking an affordable condominium. Since June, CBRE Research has seen new condominium projects along the new extension and the future routes of mass transit lines with a starting price under THB 2 million, and those along existing mass transit lines are usually priced lower than THB 3 million.
On the other hand, there has been no newly launched condominium in the high-end and above segments this year due to the high level of unsold supply and high land cost in prime locations. Investors have become more cautious in spending a large amount of cash during these uncertain times.
Based on a survey by CBRE Research, despite the economic slowdown, some of the newly launched condominiums have had a good sales rate during their first launch. Most of these projects have been launched with a product and pricing that are mainly targeting large demand from buyers with lower-purchasing power and are located in an attractive location with limited available condominium supply in the area.
Nevertheless, although this seems like a healthy path of recovery for the condominium market, the amount of incoming supply is still alarming. Over 60,000 condominium units are expected to be completed in 2020 and approximately 80,000 units in 2021-2022. With over 140,000 condominium units waiting to be transferred within the next two years, there is a possibility that a large number of booked units could return to such a volatile market as some cash-strapped buyers could decide not to transfer their units.
“The future of the condominium market depends on the direction that residential developers will take collectively. With the 10-year record low number of newly launched condominium projects, this is the moment for the market to correct its long-standing oversupply and overpricing issues,” Mr. Rathawat added.
CBRE Research believes that going forward, opportunities for the condominium market still lie ahead. These opportunities include the four under-construction mass transit lines that are expected to be completed in 2022, the new Bangkok City Planning that will unlock many potential locations for condominium development and foreign demand that will come back once the COVID-19 situation ends.