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Bangkok Property – Low Prices in Perspective

By on Apr 11, 2015 in Property News

pic1ONE interesting topic in the news recently was the report from CBRE that certain condominium units in Bangkok were selling for more than Bt300,000 per square metre. Indeed, our own Ashton Asoke building has seen some units change hands in the secondary market at above that price. What does this tell us about the broader market?

Bangkok has invested hundred of billions of baht in the mass transit. This investment will raise the value of real estate around that infrastructure, simply because greater access increases the value of any location. That is why land next to a road is worth more than land in the middle of a farm.

Given the investment in infrastructure, it is somewhat surprising that the growth rate of the peak price for the best buildings in the best locations has only been 6 per cent a year over the last seven years. Perhaps something else has been preventing a bigger rise. Perhaps the rise is slow because Bangkok property is fundamentally unaffordable and that’s holding prices down? We all know that the Bangkok property rental market is a beautiful example of a liquid and competitive free market, with thousands of units of every type available for rent. So rental prices probably approximate what the market is willing and able to afford for the type of building and location suitable for each sector’s income. So looking at rental yields will be able to tell us whether property prices have risen above affordability, and thus have limited upside.

According to the Global Property Guide, Thailand’s gross rental yields are among the highest in Asia. Only the Philippines, Indonesia and Cambodia have higher yields. To put this in basic terms, this means Thailand’s property prices are among the lowest in Asia relative to what it costs to rent a property.

So the answer to the question of whether Bangkok property prices are too high turns out to be another question: Why are they so low? The answer is clearly the political issues and flooding, of course, and there exists the possibility of a rebound once worry about these factors no longer affects the market.
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