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High city land prices push condo market into suburbs

By on Jun 07, 2013 in Property News

The Bangkok condominium market is set to grow further and will encroach on the suburbs, according to research by CB Richard Ellis (Thailand).

The midtown market will face a situation where a small condominium unit with proximity to a mass-transit station will be more expensive than a townhouse in the same general area and growing competition for midtown and emerging suburban locations with lower prices. This conflict will be resolved with sizing and market pricing and will require in-depth market study to ensure feasibility.

At present, the midtown market is not a market for short-term speculators as the resale market will be less liquid.

Within the prime downtown locations such as areas surrounding Lumpini Park including Rajdamri, Ploenchit, Wireless Road and Langsuan and major main roads in Sukhumvit, there will be fewer new freehold projects as there is limited freehold land available. The high land price above Bt1.5 million per square wah (Bt375,000 per square metre), which is set to continue to rise, will also affect the feasibility of condominium projects.

Risks of secondary sites

In secondary locations within the central business district (CBD) and sub-sois, developers need to be more cautious in terms of launching new projects, as higher land prices and construction costs will drive up prices over the market affordability, CBRE said.

The prime downtown areas have drawn continued interest from foreign buyers, particularly from China (including Hong Kong), Singapore, Taiwan and Japan. They consider Bangkok both attractive and affordable for second residences. CBRE expects the downtown market to be a healthy, low-volume and high-value market with the clearance of built unsold inventory and a limited number of new launches.

Market prices have dramatically shifted over the past two decades from Bt35,000 per square metre at Somkid Gardens, one of Bangkok’s first condominium developments, to prices in excess of Bt250,000 per square metre today. While each price barrier at Bt100,000, Bt200,000 and Bt300,000 per square metre seemed impossible to achieve at the time, these barriers have all been broken. In the next decade, prices will continue to rise on the back of limited freehold supply and increased demand for prime CBD locations.

The Sukhumvit area has shown the highest price appreciation in recent years, and no one would have predicted prices of Bt200,000 per square metre 18 months ago, CBRE noted. With continued redevelopment, the Skytrain and new major retail and office developments, Sukhumvit is becoming the prime location, albeit at a discount to Central Lumpini prices.

Source : The Nation 5 June 2013

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