Don’t count on Bangkok condo bargains yet Investors may want to take profits soon
13/11/2006 Nina Suebsukcharoen The condominium market might be slowing slightly but would-be buyers who are waiting for prices to fall could be in for a disappointment, says Robert Collins, managing director of property management firm Savills (Thailand) Ltd. Prices are unlikely to go down and even if they do drop, the slide would not start for another two years, he believes. “It’s very, very long incubation period for a market downturn in Thailand. Even in the 1997 crisis period, it was quite a long period before developers actually started cutting prices,” he said. For this reason Mr. Collins advises buyers to make their purchases now if they identify a property that meets their requirements. By the same token, those who bought condos three years ago when prices were considerably lower and want to sell should act now and take profits because prices have reached a plateau. The demand outlook is also softening, at least among foreigners, who are waiting to see how Thailand’s political developments play out before committing to purchases in Bangkok, Mr. Collins noted. “Property markets elsewhere in the region have been performing exceptionally well,” he said. “The money is there, but people are definitely taking a wait-and-see attitude [in Thailand].” Even though slight slowdown is apparent, Savills is seeing transactions both at the resale level and in new developments. “I think there is a little bit of a wait-and-see attitude following the coup but we definitely haven’t seen downturn may build a degree of pent-up demand. Mr. Collins expects the market to quickly react positively to any truly positive messages from the government because this is what people are waiting for. And despite the slower pace of the market, he does not see developers holding back launches, noting that planning a projects takes a long time. The situation at the moment is not volatile and by the time sentiment has recovered it will be pretty much in line with the new launches. For now, there are two clear trends is the Bangkok condominium market:highend buildings consisting of larger units, and budget properties featuring small units of 30-50 square metres each. The latter cater to a mass market, with people of widely varying salary levels who have housing needs particularly in the central business district area. “Those developers [of smaller units] are wisely catering to a need in the marketplace and those buyers aren’t generally buying for investment purposes. They are buying as owner-occupiers, and it’s definitely a strong trend.” While good property tends to hold its value and in some cases even appreciate sharply, mass-market condominiums are unlikely to lose value over a long period, though they are not great investments, says Mr. Collins. “They are built for an end-user and they differ from the luxury high-end product that is geared towards end-users and investors.” Pemika Chatpinyakoop, Savills’s manager for residential sales, says that buying a small condominium along the skytrain route is still a sound investment. Owners would be able to sell in future because by then some owners might want to combine two to three units to expand their space. Mr. Collins noted that as Bangkok’s population continues to grow with choice plots of land always in short supply, residences for the expanding workforce are always needed. Of late it has become abundantly clear that the city is spreading. A few years ago a large number of people would have been reluctant to live in the Onnuj area but now there are several new condominium buildings there, especially the budget variety. It is possible that condominium development will reach Sukhumvit 107, the last stop of the skytrain extension, and Ms. Pemika agrees that condos will follow wherever the skytrain goes. The market is being helped by lifestyle changes and heavy promotion of condominium living, which is suited to today’s smaller family units. However, it’s worth noting that at the eastern extremes of Sukhumvit, there’s little difference between the price of a decent-sized condo of 60-80 square metres and that of townhouse . If the choice is between the two types of residence, Mr. Collins said he would opt for a townhouse because it is likely to hold its value better. “A townhouse is landed property and that’s always better.” Also of interest to owner-occupiers as well as investors are riverside condominium developments along Rama III Road. Mr. Collins says these units are available at a lower entry level while offering good vehicle access to the central business district. “I think Rama III will do quite well going forward.” He also observed that expats who are in Bangkok for short periods of time lean toward living along the skytrain route, but those who have been in the city longer will drive and typically do not want to limit themselves to the Sukhumvit corridor.