Downtown Condos Turning into Low Volume Luxury Market
Not only has the split between downtown and midtown condominium markets deepened, a smaller volume of new products in the heart of the city has turned it into a luxury zone that only the well-heeled would dare to step in, James Pitchon, executive director of CBRE last week.
There is an increasing scarcity of prime land and the plots that are left are very highly priced with those in Lumpini area selling at way over 200,000 baht per square meter. Even in Sukhumvit it is very difficult for anyone to sell good plots at less 150,000 baht a square meter.
“If you were describing in items of cars, the downtown market is becoming very much a BWM or Mercedes market.”
Unlike the midmarket segment which is dominated by the strong demand for one-bedroom units, the limited number people who are buying downtown condos usually want a larger home.
There is still demand but the new projects will generally have to be quite exceptional in terms of quality and location in order to sell.”
“We think that there will be a limited number of new launches and they will be at the higher end of the market because it is increasingly difficult for developers who want to develop one-bedrooms to buy sites at prices that enable them to sell condominium at affordable level.”
While the majority of the condominium developers are now focusing on the one-bedroom mass market, Mr. Pitchon has noticed that this too has changed with end-users now dominating it and there being less speculative and rental activity.
Of the issues that end-users focus on it is affordability which is non-negotiable with the other two, location and size, being what they compromise on.
“So you have got one fixed – affordability – and two variables – location and size. So the further away you move, you have got the purple line, you can play 50,000 baht a square meter so 1.5 million baht for 35 square meters.”
However, 35 square meters on Ratchada, it’s 100,000 baht so it’s 3.5 million baht, for many people that is beyond their budget.”
“So prices have gone up and my feeling is while there is some growth in the affordability level it is pretty much fixed and not moving quickly.”
“In an ideal world, everybody wants to be next to a skytrain station so the compromise is can you be further away, so either it’s a low-rise block inside a soi or just further away on the main road.”
“Some areas can exit without mass transit because it’s densely populated so there has been activity in Pinklao where there is currently no mass transit system.”
The perplexing issue is how small could a condominium get and Mr. Pitchon has discovered that the legal limit is 20 square meters with 22 square meters being the smallest his company has come across.
Another interesting facet of the midtown market is that there generally is a finite amount of demand in each area at any one time which tends to lead to hot spots developing and then moving to other zones.
“Right now we are seeing hot spots in Rama 9 Or Sor Mor Thor intersection and along the purple line in Ratthanathibet.”
Although Bangkok’s condominium market is turning into a triangle with there being less people up at the top who mainly want larger size units, there is also opportunity to buy at lower prices because some buildings which were completed over the last four years are clearing inventory.
“For example, Millennium which had a large unsold inventory has significantly reduced the number of units that are available for sale, nay be by discounting, but Millennium is a very good value for money in some cases below 100,000 baht a square meter.”
“There is a diminishing amount of unsold inventory so the ability to buy a relatively new unit at a discounted price is becoming increasingly rare.”
“All those properties we have seen significant increase in resale prices because they are the right product, even though some of the buildings are a few years old now, and the market clearly identified what they think are the best buildings.”
“And Thai buyers are willing to pay premium prices to get into those buildings. Why do they want to do that? It’s because actually there is very little new supply of larger units coming on line.”
Although Thais dominate both downtown and midtown markets, Mr. Pitchon has seen limited return of some foreign demand because Bangkok is still regarded as being good value.”
“Not is it only good value prices are also increasing in Bangkok whereas they are flat in Hong Kong and Singapore – so Bangkok is still seen as a growth market.”
“But the majority of the purchases, 80 to 85% in the downtown market are Thai.”
It is interesting that the Bangkok mass market is driven by one-bedroom condos and except for the city center luxury segment people are mostly still not living in two- to three-bedroom units.
“It is not an acceptable practice because you can still buy a house at the same price.”
What these buyers do is either first buy a house in the suburbs then a small unit midtown or vice versa and use the latter as a weekday home.
“You already got a house and buy a condo for the kids to go to school. So the big difference between here and the other cities is that we don’t see a large two- to three-bedroom market.”
“Here housing is still affordable and the extension of the mass transit lines means that in many areas a two- to three-bedroom house is both affordable and you get a location that is satisfactory.”
“So the condominium market, apart from downtown, is almost pretty much entirely one bedroom.”
Source : Bangkok Post 24 August 2012