The Bangkok condominium market has continued to see new projects launched in the first quarter of this year, underlining that developers have remained confident in demand, says a new report by JLL (Jones Lang LaSalle), a professional services firm specializing in real estate.
According to the latest research released by JLL’s Thailand Property Intelligence Centre, there were 13 condominium projects launched in Bangkok in the first quarter of 2015. Among these, four projects are in what would be considered the ultra-luxury segment, with prices offered at above THB 250,000 per square metre. Located in Bangkok’s central business areas (CBA), these four ultra-luxury projects include Four Seasons Private Residences Bangkok (355 units) on Charoenkrung Road, Q Sukhumvit (273 units) near BTS Nana, The Diplomat 39 (160 units) near BTS Phrom Phong and Nimit Langsuan (187 units) near BTS Chidlom. While the average reported sales rate of the four projects as at the end of March was 46.2%, The Diplomat 39 and Nimit Langsuan reported strong sales rates at 70% and 80%, respectively.
Rising land prices pushes up new condo development costs
While construction costs have stayed relatively stable thanks to lower oil prices that have allowed for a reduction in costs of certain construction materials, rising land cost has now become a significant part of the development costs in prime locations.
Suphin Mechuchep, Managing Director of JLL in Thailand.
Suphin Mechuchep, Managing Director of JLL, commented: “Selling prices of luxury condominiums in Bangkok, particularly in key central business areas with easy access to BTS or MRT, have continued to grow and will grow further, due mainly to rising development costs.
“Generally, land cost represents 15% of the total development cost of a condominium project. Nowadays it accounts for 25% for a condominium development in prime locations. With a growing scarcity of prime land for new developments, selling prices in future luxury condominium projects are likely to rise further. For this reason, there remain a lot of people who want to buy luxury condominiums in prime locations with a hope for a capital gain in the long term. Having said that, there are more and more questions about to what limit buyers would remain willing to accept with rising prices,” added Mrs. Suphin.
Buyers show stronger interest in more affordable older developments
Bunthoon Damrongrak, Head of Residential Sales and Leasing at JLL, said, “Demand for luxury condominiums has continued as reflected by strong sales rates in a number of newly launched projects in Bangkok. However, higher selling prices in these projects are encouraging more condominium buyers to look for more affordable units in older buildings.”
Recent condominium sales transactions concluded by JLL show condominium units in older buildings are typically 20-30% cheaper than those in newly launched projects located in the same area.
“We have received more enquiries from buyers looking for units in older buildings. Most of them are looking to purchase used or backlogged units for own use. Some of them are also buying used units to put them up for rent. However, as newer buildings attract tenants better, purchases of used units in older buildings as an investment are limited to buildings that occupy an exceptionally prime location, preferably with easy access to a BTS station where leasing demand is strong. Whether it be for own use or as an investment, buyers tend to choose units in buildings that are well managed and maintained to look like new,” said Bunthoon.
An artist’s impression shows the newly launched The Diplomat 39 luxury residential project in Bangkok by property developer the KPN Group. The 31-storey building has units priced from 15-185 million baht.
