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Bangkok Residential Sales – Q 2 2009

By on Oct 20, 2009 in Research, Residential

Summary
The biggest change in Q2 2009 has been the nationality of purchasers. In 2008 up to 50% of primary sales purchasers for off plan sales were foreigners. In the second quarter of 2009 we saw that change to Thais making up 80% of purchasers both for primary sales from developers and resales in projects approaching completion. Thai purchasers believe that prices are not going to fall significantly. They also see property as a reasonable investment compared to equities or the fixed income market.

The second quarter saw a significant improvement in condominium sales. We believe that current buyers are either end-users or buy-to-rent investors. There is no incentive for speculators to buy off plan projects in the high-end sector (prices above 100,000 baht per square metre) as prices are not rising.
The second quarter of 2009 has seen a significant rise in the number of completed condominium units with 2,501 being built. This brought the total number of condominium stock to 60,507 an increase of 4.3% Q-o-Q and a marked increase of 14% Y-o-Y. The increasing condominium supply doesn’t look like stopping with a further 8,389 units planned for completion by the end of 2009.

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. The overall occupancy rate slightly decreased by 11% from 84.4% in Q2 2008 to 73.4% in Q2 2009 this is mainly due to the increase in new completed supply.
In Q2 2009 the average asking price of off-plan condominium projects in the high end and above bracket in downtown Bangkok was 128,040 THB/m2 declining from 139,436 THB/m2 or 16% since December 2008.
The average achieved re-sale price of units in completed upscale and above units increased by 8.4% Y-o-Y from 102,875 THB/m2 to 110,806 THB/m2.

Outlook
The amount of new supply due to be completed over the remaining months of 2009 and in 2010 means that the stress test will continue. We will see if developers are able to sell their unsold inventory and if speculative buyers can resell units where they do not want or are unable to make the final payment. The progress on these sales will determine both price levels and when we will see an increase in new launches. The growth in the number of Thai buyers is re-assuring and it will be the appetite of Thai purchasers to buy into buildings that are being completed that will determine the course of the Bangkok condominium market.

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