Bangkok Condominium Market Q3-2010

Bangkok ConDoMInIUM Market rePort

thailand

www.colliers.co.th

Bangkok Condominium MarketExEcutivE Summarynew launches in Q3 2010 increased dramatically compared to the previous quarter as delayed launches were resumed after the unfavourable conditions for most of Q2 2010.

only 1,900 units were supplied in Q3 2010 after the ending of the tax incentives, however it is forecast that up to 23,000 could be supplied in Q4 2010.

Developers are shifting focus towards urban Bangkok as more units will be supplied in the urban area. Suburban Bangkok still remains firmly on the radar with listed developers targeting the low to mid end segment of the market. For the whole of Bangkok 75% of units were launched by listed developers in Q3.

the luxury market has remained resilient throughout the year and launches in Q3 2010 were particularly strong.

markEt indicatorS

Q2-Q3 2010

Supply

launchES

pricES

takE-up

occupancy

Q3 2010 | CONDOMINIUM

BANGKOK CONDOMINIUM MARKET REPORT | Q3 2010

COLLIERS INTERNATIONAL | P. 2

nEw condominium launchES rEach rEcord hiGhS

Source: Colliers International thailand research

newly launched units in the third quarter of 2010 increased over five fold from Q2 2010 and represented a 63% increase on the robust Q1 2010 figure. nearly 23,600 units were launched in Q3 2010. Many launches were put on hold due to the events of april/May and these recommenced

in Q3 which partially accounts for the surge. However the overall outlook of developers remains bullish in tapping into latent demand despite the sporadic travails afflicting the country.

nEwly launchEd condominium unitS durinG thE yEar 2009 – Q3 2010 by QuartEr



ZoninG

city arEa the area covers four adjacent but competing sub-markets: the Sukhumvit section comprising Sukhumvit road between Soi 1 and Soi 55 to the north and Soi 2 and Soi 38 to the south; the Central Lumpini section including Phloen Chit road, rama I road, Soi Langsuan, Soi Sarasin, Chitlom road ratchadamri road, Witthayu road and rachaprasong

road; the Silom / Sathorn section; and the riverside section fronting the Chaophraya river along Charoenkrung road and Charoennakorn road, where several five-star hotels are located. the City area is convenient for businessmen, expatriates and tourists, because of its proximity to many office buildings, retailing and local attractions.

city FrinGE arEa this area covers three parts of Bangkok:

o northern Fringe: this section covers the BtS route starting from ratchathewi Station to Mo Chit Station to the north and the Mrt route starting from Petchaburi station to Bangsue station to the north. o Southern Fringe: this section covers narathiwad ratchanakarin road, Chan road, Sathupradit road, Charoenkrung road and rama III road along the Chaophraya river.

o eastern Fringe: this section covers the BtS route starting from thong Lor Station to on nut Station to the east, rama IV road and Petchaburi road,

this area covers locations with their own local infrastructure and convenient transportation but require commuting to have access to the central business and entertainment areas.

outEr city arEa the area covers two parts of Bangkok:

o outer City (east): this section starts from the extension of the BtS route at on nut Station to the Bangkok boundary to the east. o outer City (West): this section starts from the extension of the BtS route at taksin Station to Bang Wa station which includes the area from

krung thonburi road to ratchaphruek road near Petchakasem intersection.

Suburban banGkok these are the environs outside the areas already mentioned. expansion of the mass transit system is the main determinant for increasing future supply in a particular area. the expansion from on - nut to Samut Prakarn is scheduled to be completed in 2011. the expansion of the BtS will benefit directly the surrounding condominiums, as it will considerably reduce transportation costs and time. this will encourage the development

of new condominiums in this area. Suburban Bangkok represents the biggest area and for the purposes of this report includes Bangkok city old town (koh rattanakosin area and boundary area). this location has comprehensive town planning controls restricting building height, so there are no condominium projects in the area.



nEwly launchEd condominium unitS in Q3 2010 by location

a compariSon oF nEwly launchEd unit by liStEd company and non liStEd company durinG Q1 2009 - Q3 2010





the majority of launches in Q3 2010 occurred in the urban area compared to suburban Bangkok. the suburbs have dominated supply but now the urban areas are proving more popular.

Within urban Bangkok, the northern Fringe area has shown the highest numbers with approximately 4,300 units. nearly 52% of the total units were launched in September.

the largest project in this quarter, the trust residence Pinklao by the Confidence Co., Ltd., was launched in the suburban Bangkok area with a total of 1,399 units. However, the listed companies (including their subsidiary companies) continued to lead the market with approximately 17,000 units or 75% of the total in Bangkok.

Listed developers continue to take up the lion’s share of newly launched units and for Q3 2010 this has become more pronounced. Larger developers who previously focused on more mid to higher end projects

such as Sansiri and Quality Houses, have now entered the market for units below two million baht that have become all the rage.


More than 2,500 units were launched in the City area for Q3 which shows that the surge has also taken place in prime areas where land is more expensive. the limited number of launches prior that was a direct

consequence of the protests which began in February 2010 but was ratcheted up in april.

although the political protest was in the City area, it impacted other areas too in Q2 due to buyer sentiment and transportation problems

during the protests. newly launched condominium units in the northern Fringe area dramatically increased to more than 4,300 units.



nEwly launchEd condominium unitS in city arEa, Q1 2009 – Q3 2010

nEwly launchEd condominium unitS in northErn FrinGE arEa, Q1 2009 – Q3 2010


hiStorical Supply


Source : Department of Land, Colliers International thailand researchremark : the number of units does not include projects from the national Housing authority

Source : Department of Land, Colliers International thailand research

additional Supply by QuartEr

total hiStorical Supply by location to Q3 2010

only approximately 1,900 new condominium units were completed and registered at the Department of Land in Q3 2010 despite the continuation of some of the incentives. However the rush to beat the previous deadline in Q2 for incentives was largely the cause for this fall. overall there was a drop of about 44% from the previous quarter. However total

condominium units scheduled to be completed in Q4 2010 could be nearly 25,000 units. Whether a significant proportion reaches the scheduled completion deadline of 2010 remains to be seen.

around 67% of total condominium units are located in the suburban Bangkok area with a total of more than 186,000 units. Within the urban area, the northern Fringe contains the most units due to its proximity to

the centre, mass transit connections and relatively lower land prices compared to the City area.




only 65 units was added in Q3 2010, so total supply in this area was approximately 21,700 units. roughly 3,600 units are scheduled to be

completed in the last quarter of this year.

approximately 250 units were added in Q3 2010, although almost 8,500 units are under construction and scheduled to be completed in this year. this area still remains the main target for condominium projects in the

near future, especially Phahonyothin, ratchadapisek, ari and Sutthisan road. the northern Fringe contains a significant number of BtS and Mrt stations, the key public transportation arteries in Bangkok.



additional Supply pEr QuartEr | city arEa, Q1 2009 – Q3 2010

additional Supply pEr QuartEr | northErn FrinGE arEa, Q1 2009 – Q3 2010



FuturE Supply

Source : Colliers International thailand researchremark : Supply does not included unit in Suburban Bangkok

cumulativE FuturE Supply SchEdulEd to bE complEtEd durinG thE yEar 2010 – 2013

by location in urban banGkok. (aS oF Q3 2010)

the northern Fringe area continues to be the main player in urban Bangkok with approximately 8,450 scheduled to be completed in the last quarter of 2010 and some projects delayed from the second quarter. It

is expected that the northern Fringe will continue to dominate supply for the early part of the decade.

takE up




the take up rate for condominium projects in Bangkok for Q3 was approximately 51 %. the occupancy rate in the northern Fringe area was the highest followed by the City area and suburban Bangkok area. Various factors account for this; the fact that many of the northern Fringe launches are close to mass transit lines means that they are very

popular with buyers. the prime location of the City area accounts for the high take up there and the affordability of suburban Bangkok to mostly first time buyers is the main reason behind its popularity. It must be pointed out that over half of the units were launched in September, and as the last month in the quarter this would generate a lower figure.

the lesser figure for Q3 2010 indicates how buying patterns of condominiums are changing. In the past with the advent of small size unit developments, buyers would snap them up within hours of the official launch in an ‘until stocks last’ frenzied atmosphere. nowadays as more and more of these types of products are being launched, take up has been slower with similar projects now recording lower initial take up

rates. While there have been murmurs that the market is beginning to seize up, the more realistic answer is that buyers are taking their time and shopping around before making a purchase. the euphoria of the surge in buying activity in Q4 2009 to Q2 2010 is starting to become a thing of the past but not the demand for affordable units. Developers will need to work that bit harder but the rewards are still there.

SalES proportion oF nEwly launchEd unitS in Q3 2010 by location

SalES proportion oF nEwly launchEd unitS in banGkok by QuartEr



launchES with hiGh takE up ratES in Q3 2010

In the City area VIa 49 by Sansiri has shown the highest take up rate with only 85 units with a selling price of more than 140,000 baht per sq m. Unit sizes start from 35 sq m for one bedroom units and the project is located between thong Lor and Phrom Phong.

D Condo by Sansiri Plc. has shown the highest take up rate of almost 100% of its 916 units with a selling price of approximately 1 million baht. only 29 sq m studio units were available and the project is located on on nut – Latkrabang road.

noble revent by noble Development Plc. had its 261 units sold out in one day. noble revent is located in a prime area, close to BtS Phayathai Station and airport link. Most units are one bedroom with the smallest being about 33 sq m.

LPn Development Plc. still continues to be the main player in the market, Lumpini Place rama 9 – ratchada phase 2 sold out its units within a few hours. Unit sizes start from 33.5 sq m for one bedroom and 70 sq m for two bedroom units. the project is located on rama 9 road.


takE up in proximity to ExiStinG maSS tranSit linES Q3 2010



the take up rate of condominium projects less than 200 meters from BtS / Mrt lines was still the highest at nearly 70%, followed by the projects 501 – 1,000 meters from the BtS / Mrt at 59%. the projects

located more than 1,000 meters from mass transit lines showed the lowest rate of around 43%.

Source : Colliers International thailand research

the average take up rate of condominium units in the first three quarters of 2010 shows that those developments located within 200 metres of a mass transit station remain popular with buyers. the take up rate in the area 201 – 500 meters from mass transit is lowest, due to the selling

prices being similar or a little lower than the those of projects less than 200 meters from the BtS / Mrt but the additional distance means more likelihood of requiring a motorbike or taxi to a station, thus reducing their appeal to buyers.

thE avEraGE takE up ratE oF nEwly launchEd unitS durinG Q1 - Q3 2010 by diStancE From btS / mrt


initial launch pricES




avEraGE SEllinG pricES oF nEwly launchEd projEctS in city and city FrinGE arEa h12010 – Q3 2010

avEraGE SEllinG pricES oF nEwly launchEd projEctS in outEr city and Suburban banGkok arEa h1 2001 – Q3 2010

note: Q2 2010 only 1 – 2 projects were launched in each location, the selling prices may not be realistic, so the first and second quarters of 2010 have been included together for a more reliable assessment.

Selling prices remain robust during the third quarter as developers squeeze prices by reducing unit sizes to tap into demand. Prices in the

eastern Fringe area jumped by around 43% although this was primarily due to many projects being launched by listed developers who can command a premium due to their reputation and generally better financing options. City area prices have fallen due to the less desirable locations of projects away from the main roads.

note: Q2 2010 only 1 – 2 projects were launched in each location, the selling prices may not be realistic, so the first and second quarters of 2010 have been included together for a more reliable assessment.

Since 2006 big name developers, such as Sansiri, Quality Houses, tCC Capital Land, ananda Development, narai Property and Land & Houses have started to develop condominium projects in the outer City – West

area due to the extension of the BtS Silom line into thonburi. Prices over this time have reflected this fact. However the area is limited in size and prime land plots are now in short supply, recent launches include locations further from the BtS stations thus accounting for the lower selling price in Q3. the increase in Suburban Bangkok was due to the increased involvement of listed developers.


avEraGE SEllinG pricE oF nEwly launchEd projEctS in Q3 2010



the City area remains the prime location and can command higher prices. the lure of Sukhumvit road, with its own self contained environment and mass transit connections continues to propel eastern

Fringe prices. the perception of the Southern Fringe area as an upmarket location still prevails with some developers despite the lack of mass transit lines, except the recent Bus rapid transit.


Projects located within a couple of hundred metres from a mass transit station still command a premium. the location of thong Lor goes some way to explain the high prices of developments further than 500 meters

from mass transit. the area is arguably the only fashionable, up market location that is for the most part some distance from the BtS or Mrt although some are now located closer to the new airport Link.

SEllinG pricES oF nEwly launchEd projEctS by proximity to maSS tranSit linES (btS and mrt), Q3 2010


launch pricES: maSS tranSit EFFEct

trEndS – liStEd dEvElopErS arE FocuSinG morE in thE Suburban banGkok arEa

dEmand drivEr – FuturE Growth oF banGkok


Source: Colliers International thailand researchSource: Population Division of the Department of economic and Social affairs of the United nations

actual and EStimatEd addition oF population in banGkok For Each 5 yEar pEriod

In 2009 listed developers accounted for 12,000 condominium units launched in suburban Bangkok area but in the first three quarters of 2010 more than 15,500 units were launched representing an increase of 29%. this was the result of listed companies setting up new brands to

focus on the growth in the lower – mid range market and most of these are located in the suburban Bangkok area due to lower land prices. For Q4 2010 Sansiri Plc, Land & Houses Plc and Quality Houses Plc plan to launch more condominium projects in the suburban Bangkok area.

Urbanisation is a key trend in industrializing countries around the world and thailand is no exception. the lure of better economic prospects leads thousands to leave the provinces in search of a better life and the commercial centre attracts the lion share of this internal migration. also movements of migrants from the neighbouring countries of Myanmar

and Laos also have an effect. In the next five years the population is estimated to grow by 423,000 and obviously these people must live somewhere. While this is likely to require low end housing this will have a spill over effect on mid to high end housing as the population benefits from economic growth created by the increase in population.




FinancinG

thE luxury condominium markEt

Colliers International thailand research Source : Bank of thailandnote: excludes negligible amounts of financing from other sources


Financing of residential real estate is both a source of growth and a product of it but the availability of finance is vital to supporting the sector. For every quarter from 2008 financing has been on the rise and commercial banks have increasingly become the more dominant players

compared to specialized finance institutions such as the government Housing Bank which continues to provide the foundation. It would appear that even for lower end products commercial banks are willing to provide finance.

Despite the interest generated by the launches of affordable condominiums the luxury segment is also experiencing healthy growth. In fact, approximately 670 units were launched in Q3 2010. From Q1 2009 – Q2 2010 most of the launches sold out within few weeks due to limited choices but the same has not been the case for Q3 2010 due to the amount of units. Major Development Plc introduced M Phayathai with

215 units on Phayathai road, close to the airport link Phayathai station and 161 units of M Silom on narathiwas rajanakarin. Sansiri launched VIa 49 on Sukhumvit road with only 85 units. Most buyers are thai and even in this market segment foreign demand is not the most critical factor in the success in a development.

houSinG loanS For pErSonal conSumption ExtEndEd by Financial inStitutionS

luxury condominium unitS launchEd durinG Q1 2009 – Q3 2010

ForEcaSt


the breakneck number of launches is set to slow over the next few quarters but still remain robust as developers need to consolidate and focus on construction and marketing of their existing projects.

although take up has slowed the demand for low end, smaller unit size condominiums below two million baht looks set to continue as these appeal to lower income earners who constitute the vast majority of the workforce in Bangkok. the danger is that the high level of launches continues unabated thus swamping the market too quickly. However the lower take up rates will have a sobering affect on sentiment. In all likelihood launches look set to moderate to sustainable levels and allow the residential market to consolidate.

Changes in planning regulations in 2011 following the national census could lead to more relaxed restrictions on the minimum number of car parking spaces that must be included in a new development. as many projects are located close to new mass transit lines, car ownership for these buyers may be lower and developers can fit in more residential units at the expense of parking spaces.

In the long term the growth patterns of Bangkok’s residential market will be shaped by the development of new mass transit lines. affordability will continue to drive the market although it is difficult to envision unit sizes being reduced much further. only when the high density developments are completed can the standard of living for the occupiers be assessed. Developers will be taking a keen interest when these recent launches are finally supplied in order to make adjustments to future projects.


colliErS intErnational thailand manaGEmEnt tEam ProJeCt SaLeS & MarketIngWasan rattanakijjanukul | Manager

aDVISorY SerVICeSnapatr tienchutima | Manager

oFFICe, InDUStrIaL & retaIL SerVICeSnarumon rodsiravoraphat | Senior Manager

reaL eState ManageMent SerVICeSBandid Chayintu | associate Director

aDVISorY SerVICeS | HoSPItaLItY Jean Marc garret | Director

InVeStMent SerVICeSnukarn Suwatikul | Senior Manager

reSIDentIaL SaLeS & LeaSIngPatima Jeerapaet | Managing Director

reSearCHantony Picon | Senior ManagerSurachet kongcheep | Manager

VaLUatIon & aDVISorY SerVICeSnicholas Brown | associate DirectorPhachsanun Phormthananunta | Manager

PattaYa oFFICeMark Bowling | Sales ManagerSupannee Starojitski | Business Development Manager

COLLIERS INTERNATIONAL ThAILAND:

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rESEarchEr:

thailandantony PiconSenior Manager | researchEmail [email protected]

rESEarchEr:

thailandSurachet kongcheepManager | researchEmail [email protected]

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Bangkok Condominium Market Q3-2010