5 Years of Property Trends in 5 Metropolises
11 Jan 2016
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Mr. Poomipak Julmanichoti, Managing Director (poomipak.j@plus.co.th)
Plus Property Company Limited, a full-service professional property and facility management agency
New York -- New York City, colloquially known as NYC, is located in the state of New York. The city comprises five boroughs – Manhattan, Queens, Bronx, Brooklyn, and Staten Island – and spans a total area of 790 square kilometers, roughly half the size of Bangkok. With 8 million inhabitants, roughly the same total as Bangkok, New York City boasts America’s highest population density. 75% of the city’s residents do not own cars. Instead, they primarily rely on subway trains for commuting. The NYC subway system is over 100 years old and is one of the largest and oldest in the world. The city’s world-famous landmarks include the Empire State building, Broadway, Wall Street, and the world-renowned Central Park. Encompassing a land area of 3.4 square kilometers or six times the size of Lumpini Park, Central Park is located right in the heart of Manhattan. Properties in the vicinity of Central Park rank among the priciest in the United States, while Manhattan as a whole is the most popular area for property development in NYC. The Manhattan property market continues to grow after the 2008 financial crisis, making New York City the first major city to quickly bounce back from the slump. Today, only 2% of units remain unoccupied – an exceptionally low level. Unlike other cities, potential tenants seeking a unit must be the ones to pay the commission fee to agents instead of unit owners – a notable fact that underlines how strong the market is. On average, a unit owner would need just 38 days to find a tenant. On the sales front, there are 5,800 units available today – just half of the 12,000-unit supply available back in 2008. Units spend just 3-4 months on the market, again just half of the equilibrium level of 7-9 months. Prices remain on the rise and has been increasing throughout the past five years. While the New York City Council has supported the development of many new projects in the city, the supply remains inadequate in comparison to the high demand. Rental returns generally average around 3-4%. While not a high rate, NYC offers a higher chance of finding a tenant than most cities around the world. Property prices remain on the rise every year. In 2012, the company advised a group of investors to purchase units in the new 56 Leonard Street development in downtown New York for $2,400 per square foot. The project, due for completion in late 2015, now sells for $3,300 per square foot – a 37.5% increase in just three years that represents a return on investment of over 10% per year. The investors still have no intention to sell their units as they believe prices are still on the rise. The average per-square foot price of all condominium units in New York City as of Q2 2015 was $1,673 – a 9% year-on-year increase.
London is the capital city of England and a highly popular destination for Thai tourists and students alike. The city is of similar size to Bangkok, spanning a land area of 1,572 square kilometers and housing 8 million people – roughly equal to Bangkok and New York City. Out of its 33 boroughs, the biggest hotspots for top-class property are typically found in the boroughs of Westminster, Kensington, and Chelsea. Hyde Park, the most prominent park in the city and the whole of England, is located in a 1.4-square kilometer plot in the city center. Four years ago, the One Hyde Park residential complex, which is located right next to the park itself, won the honor of the world’s most expensive condominium unit at $221 million. Over the past five years, foreigners have acquired a large portion of London’s available properties. Many of these buyers are Middle Eastern millionaires investing in units for lease, which means that there are plenty of rental units available. Rental returns generally average 3% per year, although the failure to find a tenant is a risk to be considered. Most Thai buyers purchase units here for their children or the occasional getaway trips, while the leasing market is only a factor of limited influence. Property prices in central London have been on the rise throughout the past five years. Five years ago, a group of investors acquired units in Kensington and Chelsea at the company’s recommendation for £1,500 per square foot and saw prices rise to the current level of £2,000 per square foot – an average of £100 per square foot per year or 6-7% of the original price. Kensington and Chelsea property prices rose to a peak in September 2014 before suffering a 16% decline as of June 2015 due to new tax policies – especially the significant increase in stamp duty – implemented earlier this year.
Hong Kong plays host to a massive metropolis full of skyscrapers and a major financial center of Asia-Pacific. As one of the world’s three major financial hubs alongside New York City and London, Hong Kong is a wealthy city with the 10th highest average income in the world. Its outstanding public transport system covers 90% of the city’s population – higher than any other city on the planet. Thais often regard Hong Kong as the most popular shopping destination overseas due to the relatively cheaper prices of brand-name products, the tax benefits on offer, and the much closer location compared to the brands’ places of origin in Europe or the US. A flight from Thailand to Hong Kong takes up just 2-3 hours. The Special Administrative Region of Hong Kong covers an area of 1,104 square kilometers and houses 7.2 million people, making the city the fifth densest in the world. This remarkably high population density has given rise to properties that rank among the most expensive anywhere. Hong Kong can be broken down into three main regions: New Territories, Kowloon, and Hong Kong Island. The first, New Territories, is the site of the newest settlements in Hong Kong, while Kowloon contains plenty of famous shopping destinations well-known to Thai travelers such as Tsim Sha Tsui. The island is also a hotbed of new property developments, a shopping powerhouse, and a financial center. One of its most famous tourist attraction is The Peak, a scenic viewpoint at the summit of Victoria Peak that can only be accessed by tram. It is up here on Victoria Peak where property prices have reached the highest level ever recorded, with House No.1 in the Twelve Peaks development priced at £13,400 or $20,000 per square meters. Thai investors have not been very active in Hong Kong’s property market due to this price barrier. However, many investors from the island have come to Thailand for property investments to take advantage of lower prices.
Singapore is closer to Bangkok than any of the aforementioned cities. While a small island with a land area of just 718 square kilometers, the city’s population is as high as 5.5 million, making it the third densest city on Earth. Large numbers of Thais visit the island each year as it only takes two hours to travel to Singapore and visit major attractions like the Merlion, Sentosa Island, Universal Studios Singapore, Orchard Road shopping district, Botanic Garden, and the Marina Bay Sands. Singapore comprises 22 districts, with the city-center District 9 housing the most famous and priciest properties. Most expensive properties are located in the vicinity of Orchard Road, the major shopping avenue that is the Singaporean equivalent of Bangkok’s Sukhumvit Road and an indicator of similarities between the two cities’ property development patterns. Developments in District 9 were priced at SG$ 2,000 or $1,450 per square foot in 2014, putting the area on the same level as Manhattan. The market in Singapore is considerably more stable than other cities thanks to government control over property development, loans, and measures that impose additional taxes for secondary residences among others.
Bangkok is Thailand’s capital city and a major destination for tourists worldwide. In 2014, the city welcomed over 25 million international visitors. With a land area of 1,569 square kilometers, Bangkok is roughly twice the physical size of New York City and is comparable to New York City and London with an urban population of 8 million people. Similarly, Bangkok also has a city-center park in the form of the 0.57-square kilometer Lumphini Park, which is also surrounded by the most expensive properties that Bangkok has to offer – just like the pattern seen in New York City and London. The most expensive development in Bangkok is 185 Rajdamri, priced at 350,000 baht per square meter or $1,000 per square foot. Over the past five years, condominium prices in Bangkok have risen on a yearly basis, although the extent of annual change is not significant due to the availability of new projects in the city’s outer zones. The average price for new projects in 2015 stands at 131,000 baht per square meter or $375 per square foot – up 35% from the previous year thanks to an influx of new developments in the upper market segments and inner city zones. New project launches in the first half of 2015 fell 21% from the second half of last year, and projects in the 100,000-200,000 per square meter price range perform the best in the market. The best zone in terms of sell-through rates is midtown Bangkok at 87%, followed by downtown zones. The high-end condominium market is expected to perform well in the second half of the year.
Condominium price trends throughout the past five years
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