PLUS Sees Opportunity Factors for Condo Market
11 May 2021
plus news and update
PLUS examines condo-selling opportunities amid the circumstances at present, recognising that affordable condominiums that offered a complete range of common area features and room functions, and which respond to many modes of living, represent a market that still had momentum.
However, these condos also need to be situated in areas that had many amenities and offer decent commute times. The average income of people in Bangkok corresponds to a mortgage acquisition capacity for condos that do not exceed 2.3 million baht in price; condos in Bangkok’s outer and middle layers thus provide the solution to this budget. PLUS’s research found condos in the Ramkhamhaeng and Ratchada areas to have good absorption rates, while they generate a rental yield of about 5%.
Ms. Suwannee Mahanarongchai, Deputy Executive Vice President – Business Strategy and Service Expertise Development Department at Plus Property, the full-service professional property and facility management agency, revealed that the economic slowdown and the third wave of COVID-19 outbreaks presented a challenge to real estate businesses, which are expected to make use of various tactics to stay relevant in the playing field. Competition in pricing is expected to persist throughout this year.
On the part of condominiums, she expressed the belief that projects with affordable prices and with a full complement of liveability functions were ones with the best chances of trudging through current circumstances. On top of being able to accommodate daily routines, such a project must also provide flexibility in living, be appropriate for all groups of people and be situated in an attractive location that had a complete range of amenities and which offers reduced commute times.
Information from surveys by the National Statistical Office, as of 2020, indicates that a Bangkok household has an average income of 39,459 baht per month. Said income allows for the acquisition of mortgage for a condominium costing no more than 2.3 million baht. This budget is insufficient for the purchase of condos within the inner layer of Bangkok. Therefore, the Outer Bangkok and Middle Bangkok are now considered key areas that can respond to the majority of buyers.
Locations where the property market is still able to grow are ones that can accommodate the lives of every group of people and must not be too far from the city centre. They must offer job sources, educational institutes and a complete range of amenities such as malls, super markets and hospitals. In addition, they should be in close proximity to transportation hubs.Most importantly, projects at said locations must have prices that are approachable.
Scrutiny of location-specific information from PLUS’s research and development division, based on a survey for the latter half of 2020, found the Ramkhamhaeng area to have the highest absorption rate among areas within Bangkok’s outer zone – 9.80 units were being absorbed per project, per month. The Ratchadaphisek area had the highest absorption rate within Bangkok’s middle zone – 4.65 units were being absorbed per project, per month.
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Ramkhamhaeng may be considered a dense residential area with a growth tendency. Said growth may be attributed to the expansion of new rapid transit lines into this locality. 3 such lines are slated to service this area in the future; they include the Orange Line, the Yellow Line and the Brown Line. Furthermore, the area is already in the path of the Airport Rail Link service. The Ramkhamhaeng locality will become one of Bangkok’s important interchange spots that provide linkages to many areas. New office buildings are being opened in Ramkhamhaeng, which is situated near the Ratchada-Rama 9 area, a prominent business district.
Many large educational institutes are present, and there are existing amenities such as The Mall Ramkhamhaeng, Food Land, Big C and community stores while Rajamangala Stadium provides a public space for exercise. Condominiums in the Ramkhamhaeng area have seen decent reception, reflected in a selling rate of 73% of 9,358 total units on sale in the latter half of 2020. The average absorption rate was 9.80 units per project per month.
The starting price at most of these condo projects was towards the upper end of 1 million-ish baht; this price level was the one with the highest absorption rate, at 12.42 units per project per month. This reflects the continued demand for products at this price level. Said rates were in concurrence with the number of people relocating into the area. Figures from Bang Kapi District Office revealed that no less than 3,300 people have been relocating into the Ramkhamhaeng locality per year, with an average growth rate of 23% over the previous 4 years.
In 2020, the number of new residents moving in expanded by a whopping 102.80% year-on-year, at 7,280 individuals. Each year, Ramkhamhaeng University enrols an average of 35,000 new students – this presents another point of attraction for buyers outside of the real demand group, as condo letting activity has a tendency to grow. Rental yield stands at about 5-5.5% per year.
There is a tendency for condominium prices in the Ramkhamhaeng area to rise in the future, due to the locale’s good prospects; the values of condos here are expected to grow further after the completion of the Orange Line rapid transit service.
Ratchadaphisek (Ratchayothin-Ratchada-Lat Phrao) is considered an area with growth potential. It is dotted by office buildings and malls, and is an area where several main roads converge; these roads are Phahonyothin, Lat Phrao, Sutthisan and Rama 9. The two main rapid transit lines – the Green Line and Blue Line – pass through this locality and the Yellow Line will service this area once its construction is complete. Ratchadaphisek offers ease of commute via many transportation options, and this fact has resulted in the area having become a preferred area of residence for working people.
Upon analysis of demand within the condominium market for this location, the overall selling rate was 77% of 21,066 units available for purchase. The average absorption rate stood at 4.65 units per project per month, and rental yield was about 5% per year. Examined further in respect of the selling rate, it was seen that products with a starting price not exceeding 2 million baht were the most popular within this market.
These units had a selling rate of 85% – the highest among all the price levels – and an absorption rate of 3.81 units per project per month. Purchasing power for this price level is present, but limitations imposed by the price of land meant that development of property projects at this price level was subdued within the Ratchayothin-Ratchada-Lat Phrao area.
Although the economy had yet to recover and purchasing power remained low during the previous year, housing demand within the country persisted. This was in line with figures for the value of new condominium mortgages, compiled by the Bank of Thailand, which had an uninterrupted rise in every quarter of 2020. The total value of condo loans was 106.8 billion baht in 2020, an increase of 4% from the prior year. The growth may be attributed to promotional campaigns by property developers.
“This year remains a challenging year for real estate businesses, which must remain ever ready to make adjustments and implement tactics in order to make it through the current circumstances. As for future tendencies, it is believed that the government’s rapid vaccination of the public and a subsequent re-opening of the country would be the key factor that enables economic activity to resume. This is especially true for the tourism sector, which acts as a propelling force for the dispersal of income into all sectors. Further confidence-building to encourage people to spend will help the property market return to normal condition within a timely manner.
There remain critical issues which have to be monitored, including any loosening of the measures to regulate home loans (LTV) and a bill that would allow foreigners to own homes inside housing estates or increase the foreign ownership quota for condominiums. Upon the establishment of the proper criteria for these initiatives, the growth of the property market will likely be stimulated”, said Ms. Suwannee.
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