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Bangkok Residential Leasing – Q 2 2009

By on Sep 22, 2009 in Research, Residential

The surprise of the quarter was that despite the global economic recession the number of expatriates with work permits in Bangkok rose by 13.2%  y-o-y  to 79,511 according to figures from the Alien Occupational Control Division, Department of Employment. We also checked with the major international schools and they reported that they had not seen a significant drop in the number of pupils. Three apartment buildings were completed, with a total of 100 units. The total supply of apartments units was 11,072 increasing by 0.2% q-o-q and 4.9% y-o-y. The total number of condominium units in downtown Bangkok grew at a faster rate, up 4.3% q-o-q and 14% y-o-y to a total of 60,501 units. Grade A rents dropped 1.2% q-o-q and 3.9%  y-o-y from 422 THB in Q12009 to 417 THB in Q2 2009. We expect that about 684 new apartments units will be completed over the next 2 years. 15,039 condominiums are to be completed by the end of 2010 raising the total stock of downtown condominiums to 73,045.  Many purchasers of condominium units are “buy-to-rent” investors and the competition between apartments and condominiums for expatriate rental market will increase.

Supply
In Q2 2009, there were a total of 11,089 apartment units up from 11,072 units in Q1 2009. There were 100 additional new apartment units, but some buildings were under renovation and one building was converted to be a serviced apartment. Total supply did not increase by the number of new units. Supply didn’t rise significantly, only an increase of 0.2% q-o-q, and 4.9% y-o-y. The 100 new units were in three projects, two in Sukhumvit and one in the Silom/Sathorn area. The Sukhumvit area, contains 70.0% of total supply. Silom/Sathorn had of 15.1% of total downtown apartments. Central Lumpini followed with 7.8% and Riverside/Rama III was at 7.1%.

Three-bedroom units were still the majority of supply of downtown apartments in terms of room type. 54.1% of total grade A Bangkok downtown apartment units are the three-bedroom type. Total supply of Grade A and B units stood at 2,357 and 8,732 units respectively
There are 684 future apartment units in the downtown area which are currently under construction, and are expected to be completed within 2010 based on our current projection. The majority of new apartment units are being built in the Sukhumvit area, with approximately 540 units or 78.95% of future units. The rest of the future units are located in the Silom/Sathorn area with 144 units.

Demand
The occupancy rate increased to 89.6% in Q2 2009, a 0.4% increase q-o-q and 2.6% y-o-y. Grade A occupancy was 84.3%, compared to 92.2% for Grade B. Overall, 9,932 apartment units were occupied during this quarter, compared to 9,874 units during Q1 2009. In the  Riverside/Rama III area, Average Occupancy y-o-y increased dramatically by 20.7% because there was no change in supply while take-up unit soared by 31.4% y-o-y. The overall occupancy rate is still high, but the supply in this area is very low and the Sukhumvit remains the most popular area .The total Bangkok downtown apartment take-up increased by 0.5% q-o-q and 8.0% y-o-y. Sukhumvit has the highest area take-up at 6,957 units due to the most concentrated supply in the area, up 0.3% q-o-q and 6.1% y-o-y.

Central Lumpini apartments achieved the highest occupancy rate during Q2 2009 at 92.6%, despite a decrease for 0.4% q-o-q and 5.0% y-o-y.

Rent
Achieved rents dropped slightly. The highest achieved rents were in the Silom/Sathorn area, where Grade A rents hit THB 417/m2/month and Grade B THB 340/m2/month. Overall, both asking and achieved rents declined. Future condominium supply will likely hit the rental market. We think that it is unlikely that expatriate numbers will grow significantly although we have not seen evidence of a drop in numbers.
There are other factors apart from the mechanism of supply and demand that affect the rents; for example, smaller units tend to achieve higher rents per m2 than larger sizes.

The large number of condominiums stated for completion (as many as 15,039 units by the end of 2010) will greatly increase competition for apartments, given that a large portion of this future condominium supply will likely hit the rental market. Additionally, a change in the number of work-permit holding expatriates, as companies continue to cut costs, will also have the same effect. However, we have not yet seen a decrease in the official number of work-permit holding expatriates.

Number of expatriates
The number of expatriates with work permits continued to grow despite the economic recession. In Bangkok, the numbers rose by 1.9% Q-o-Q and 13.2% Y-o-y. We also surveyed the major international schools who reported that overall they expect no reduction in the number of pupils for the new academic year. We have revised our current and historic data on work permits because the last set of data counted permits by job position, not by people. The current numbers still include 14,423 permanent work permits for the whole country. These were last issued in 1972 and have not been revised. The current numbers may overstate the number of expatriates in Thailand because the permanent work permits number have not been revised.

Outlook
There will be limited new apartment supply, but competition with condominiums will increase as a further approximately 15,039 condominiums will be completed by end of 2010. We believe that as many as 50% of new condominium units may have been bought by investors who want to rent out their units. Many of the new condominium units are small studio and one bedroom units. Competition will be greatest for those unit sizes.

Bangkok Apartment rental Q2 2009 – Download full report

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