colliers international | THAILAND The Knowledge Report
Bangkok Condominium Market | 2nd QUARTER | 2010
Executive Summary
New launches in Q2 2010 fell dramatically compared to the previous two quarters as prolonged demonstrations culminating in violent rioting led to developers delaying launch dates.
The reduction in tensions means that the market is set to resume its stellar growth for the second Market Indicators half of 2010.
Q1 - Q2 2010 2010 is likely to see the largest completion of new supply since 1997 with an estimated increase of just over 30,230 units compared with approximately 27,430 units in 2009. Less than 3,200 units were supplied in Q2 2010. SUPPLY Developers are shifting focus towards urban Bangkok as more units will be supplied in the urban area Launches compared to suburban Bangkok.
Prices New condominium launches tumble due to unrest take-up
Newly launched condominium units during the year 2009 - Q2 2010 by quarter.
Source : Colliers International Thailand Research
Newly launched units in the second quarter of 2010 decreased from the previous quarter by approximately 67% due to the demonstrations and violence in April and May, which led to numer- ous developers postponing their projects. Nearly 4,600 units were launched in Q2 2010.
www.colliers.co.th The Knowledge Report | 2nd Quarter | 2010 | Bangkok Condominium Market
ZONING
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• CITY AREA
The area covers four adjacent but competing sub-mar Silom / Sathorn section; and the Riverside section fronting the kets: the Sukhumvit section comprising Sukhumvit Chaophraya River along Charoenkrung Road and Charoenna- Road between Soi 1 and Soi 55 to the north and Soi 2 korn Road, where several five-star hotels are located. The City and Soi 38 to the south; the Central Lumpini section Area is convenient for businessmen, expatriates and tourists, be- including Phloen Chit Road, Rama I Road, Soi cause of its proximity to many office buildings, retailing and local Langsuan, Soi Sarasin, Chitlom Road Ratchadamri attractions. Parts of this area were directly affected by the April Road, Witthayu Road and Rachaprasong Road; the and May demonstrations and violence.
• CITY FRINGE AREA
This area covers three parts of Bangkok:
o Northern Fringe: This section covers the o Eastern Fringe: This section covers the BTS route starting from BTS route starting from Ratchathewi Station Thong Lor Station to On Nut Station to the east, Rama IV Road to Mo Chit Station to the north and the MRT and Petchaburi Road, route starting from Petchaburi station to Bangsue station to the north. This area covers locations with their own local infrastructure and convenient transportation but require commuting to have o Southern Fringe: This section covers access to the central business and entertainment areas. Narathiwad Ratchanakarin Road, Chan Road, Sathupradit Road, Charoenkrung Road and Rama III Road along the Chaophraya River.
• OUTER CITY AREA
The area covers two parts of Bangkok:
o Outer City (East): This section starts from Station to Bang Wa station which includes the area from Krung the extension of the BTS route at On Nut Thonburi Road to Ratchaphruek Road near Petchakasem inter- Station to the Bangkok boundary to the east. section. o Outer City (West): This section starts from the extension of the BTS route at Taksin
• SUBURBAN BANGKOK
These are the environs outside the areas already this area. Suburban Bangkok represents the biggest area and for mentioned. Expansion of the mass transit system is the the purposes of this report includes Bangkok city old town (Koh main determinant for increasing future supply in a Rattanakosin area and boundary area). This location has com- particular area. The expansion from On - Nut to Samut prehensive town planning controls restricting building height, Prakarn is scheduled to be completed in 2011. The so there are no condominium projects in the area. 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
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Newly launched condominium units in Q2 2010 by location
Source : Colliers International Thailand Research
Suburban Bangkok area continued to show the highest numbers The largest project in this quarter, The Tree Kiak Kai Station with approximately 2,900 units being launched in Q2 2010. The by Pruksa Real Estate Plc. was launched with over 1,000 units slowdown in general activity by consumers during the protests in the suburban Bangkok area. The listed companies continued was the most important factor affecting the market as more de- to lead the market with approximately 3,000 units or 68% of the velopers postponed projects in all locations. More than 44% total market. of total projects were launched in June and some projects were delayed to the second half of 2010.
Historical Supply
Source : Department of Land, Colliers International Thailand Research Remark : The number of units does not include projects from the National Housing Authority
Only approximately 3,200 new condominium units were However total condominium units scheduled to be completed in completed and registered at the Department of Land in Q2 the rest of 2010 is estimated to be nearly 22,500 units. 2010 despite the continuation of some of the incentives. This represented a fall of about 54% from the previous quarter.
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Total Supply by Location to Q2 2010
Source : Department of Land, Colliers International Thailand Research
More than 68% of total condominium units are located in the urban area, the Northern Fringe contains the most units due to suburban Bangkok area or more than 186,000 units. Within the its proximity to the centre and mass transit connections.
City Area
Source : Colliers International Thailand Research
Only 333 units were added in Q2 2010, so total supply in this scheduled to be completed in the second half of this year. area was approximately 21,600 units and roughly 1,700 units are
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Northern Fringe Area
Source : Colliers International Thailand Research
About 1,600 units were supplied in Q2 2010 but almost 7,000 Phahonyothin, Ratchdapisek, Ari and Sutthisan Road. The units are under construction and scheduled to be completed in Northern Fringe contains a significant number of BTS and MRT the second half of the year, and this area still remains the main stations, the main public transportation systems in Bangkok. target for condominium projects in the near future, especially
Future Supply
Cumulative future supply scheduled to be completed during the year 2010 – 2013 by location in urban Bangkok. (As of Q2 2010)
Source : Colliers International Thailand Research Remark : Supply does not included unit in Suburban Bangkok
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The Northern Fringe area continues to be the main player in The sale of a prime land plot in Wireless Road for 1.5 million urban Bangkok with approximately 7,000 scheduled to be com- baht per square wah (375,000 per square metre) means that a pleted in the second half of 2010 or an increase of around 187% condominium unit in this location could be priced up to 300,000 from the first six months of 2010. The City area still remains baht per square metre. a focal point for developers for high – end category projects.
Future Supply – The urbanization of Bangkok
The proportion of existing condominium supply in Bangkok by location, as of H1 2010
Source : Colliers International Thailand Research
The proportion of future condominium supply in Bangkok by location, by 2013
Source : Colliers International Thailand Research
Suburban Bangkok area still contains the largest share of of urban living, especially in the form of better transportation. condominium supply catering predominantly for the mid to The general reduction in unit size means that more residents are low end segment. However, developers are shifting focus on able to afford this urban lifestyle. This trend will likely effect the condominiums within the urban Bangkok area as demonstrated direction of office and retail development in the process. in the charts above. More people are attracted to the convenience
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Take up
Sales proportion of newly launched units in Q2 2010 by location
Source : Colliers International Thailand Research
The take up rate for condominium projects in Bangkok for Q2 lines means that they are very popular with buyers. The prime was approximately 77 %. The occupancy rate in the Northern location of the City area accounts for the high take up there and Fringe area is the highest followed by the City area and subur- the affordability of suburban Bangkok to mostly first time buyers ban Bangkok area. Various factors account for this, the fact that is the main reason behind its popularity. many of the Northern Fringe launches were close to mass transit
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Launches with high take up rates in Q2 2010
In suburban Bangkok area LPN Development still continues to The Tree Kiak Kai Station by Pruksa had its 1,047 units sold be the main player in the market, Lumpini Condotown Ranin- out in one day with just the top floor kept until construction is dra – Nawamin building D sold its units out in a matter of hours. completed. The Tree is close to the future BTS line (Blue Line) This building contained only studio units at just 22 sq m. with a and new parliament as well as being located near the Chao Phra selling price starting at 678,000 baht per unit. Ya river and with unit sizes being affordable.
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The Seed Atom by Pruksa was the only project launched in the by a BTS station. Studio units of 22.41 sq m and one bedroom Northern Fringe area and it sold out all of its 557 units in 3 hours. units of 34.79 sq m were available, which was one of the critical This development is located in the newly fashionable Ari district factors behind the successful take up.
In the City area KEYNE by Sansiri has shown the highest take It is noticeable that small unit sizes were a common feature of the up rate almost 95% with 208 units with a selling price more than successful launches. 140,000 baht per sq m. Unit sizes start from 33.5 sq m for one bedroom units and the project is located between Thong Lor and Ekamai.
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Take up in proximity to existing mass transit lines
Source : Colliers International Thailand Research
In the second quarter activity in Bangkok was nondescript due 201 – 500 meters from mass transit lines showed the lowest rate to the political violence, so developers delayed launching their of around 37%. While access to mass transit remains a strong condominium projects. For those projects that were launched magnet for buyers, the specific location is still key and pricing the take up rate in Q2 was higher than Q1. The take up rate of may be overestimating projects located more than a few hundred condominium projects less than 200 meters from BTS / MRT metres from a station. The difference from being able to walk to lines was still highest at nearly 96%, followed by the projects far a station or having to rely on transportation remains crucial. from BTS / MRT 501 – 1,000 meters 84%. The projects located
Initial Launch Prices
Selling prices of newly launched projects by location 2005 - Q2 2010
Source : Colliers International Thailand Research Note: Q2 2010 only 1 – 2 projects were launched in each lo- City – West area only 2 projects, by Pruksa Real Estate Plc., were cation, the selling prices may not be realistic, so the first and launched in H1 2010 which extracted a higher selling price in second quarters of 2010 have been included together for a more the area. The selling price of two projects in the Southern Fringe reliable assessment. area was higher than other projects in the area. The average sell- ing price in the Eastern Fringe showed the biggest drop of nearly The average selling price decreased in every location, except in 36%, because only lower grade projects were launched and these Outer City – West and Southern Fringe area only. For the Outer were further from the BTS line compared with previous years.
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Average selling price of newly launched projects in Q2 2010
Source : Colliers International Thailand Research
The average selling price in Q2 2010 decreased in four locations. due to more projects being in the luxury bracket and having In Q2 2010 the average selling price was higher than Q1 2010, better access to the BTS/MRT.
Take up
Selling prices of newly launched projects by proximity to mass transit lines, H1 2010
Source : Colliers International Thailand Research
The proximity of a project to mass transit lines has a positive general a premium can be attached to short distances from mass effect on pricing. Being located within 200 metres from a sta- transit and this could lead to the development of smaller mass tion means that transportation from a condominium is usually transit systems financed by the developers supported by the price unnecessary and this enhances the appeal to buyers. However effect. Grand Canal Land Plc is planning to build a monorail the chart shows some anomalies with just one luxury project on system to link its properties on Rama IX Road. Further analysis is Sukhumvit 55 road (Thonglor) with only 8 units located over recommended for other parts of Bangkok. one kilometre from the BTS but with a high selling price. In
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Trends - Bus Rapid Transit (BRT)
The BRT entered service at the end of Q2 2010 on a trial basis with free fares. The line begins at Sathorn Road and terminates on Thonburi side at Ratchaphruek. It is difficult to analyse the effect of the BRT on condominium developments at such an early stage but certain observations can be made. The experience is something of a hybrid between a mass transit and ordinary bus. The further the BRT goes the more it encounters road traffic. The connection between Sathorn station and Chong Nongsi is quite far. Therefore the initial prediction is that it will be of benefit to people working in offices located in the Sathorn road area and for those living by the first five or so stations.
Trends - Focusing on the mid to low end market
Condominium projects for lower – mid range will continue to and some developers, such as Regent Green Power Co.,Ltd be popular and the big developers are also interested in entering and Mankong Kehakarn Plc, have taken advantage of Board of this market, with selling prices of less than 2.5 million baht per Investment (BOI) incentives for condominium developments unit. with units being not less than 28 sq m and less than 1 Million Baht. Listed developers are also interested in the lower and mid range markets as these contain the largest slice of condominium pie,
Mid and low end brands established by developers
NO. BRAND DEVELOPER 1 The Trust Quality House Plc. 2 Condolette, The Tree, Be You, Chapter One Pruksa Real Estate Plc. 3. Lumpini Condotown, Lumpini Ville LPN Development Plc. 4. D Condo Sansiri Plc. 5. The Cache, The Kith Sena Development Plc. 6. Smart Condo Prinsiri Plc. 7. City Home Supalai Plc. 8. The Center Wangthong Group
Just as manufacturers of consumer products have focused their a more discernable way. The branding of residential products attention on branding for lower priced products in the past ten in Bangkok is more intense than perhaps anywhere else in the years this has been replicated in the condominium market in world. Thailand with large developers differentiating their offerings in
Trends – Developers branching out
The robust growth of the condominium sector in Bangkok can Sansiri PCL has started to make investments in UK real estate. be attributed not only to external factors such as new transport systems and economic growth but the aptitude of the developers Stark contracts can be made between the maturity of the Thai- themselves. The provision of quality products at affordable prices land residential market and the infancy of that in Vietnam for is a cornerstone to the condominium story over the past decade example, with its generally poor quality apartment blocks in the and now the trend should be for this success to be replicated mid end segment with limited facilities and difficult to market outside of the country. Tentative steps have been made with a unit configurations. In these sorts of market many opportunities number of large developers making their first ventures abroad. are available for Thai developers to become future champions in Pruksa PLC has been involved in residential projects in Ban- the region. galore in India, Maldives and Haiphong in northern Vietnam.
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Forecast
As the unrest subsided in June confidence in the market has returned and develop- ers are looking to launch new projects on the market for the next few quarters. The ending of the government incentives and expected small rises in interest rates are unlikely to have any significant detrimental effect on the condominium market as mass transit and affordability remain powerful forces in Bangkok.
The land price in the urban area, especially along the mass transit lines affects con- dominium project development. Current Bangkok town planning expires in 2011 and it is possible that the new urban planning regulations will allow some areas to have a greater Floor Area Ratio (FAR). This means that it will be more attractive for developers to purchase land for new projects. Along with new mass transit lines and extensions this will add a further boost to the dynamic condominium market.
As the large developers grow in size it is likely that a number will seriously consider venturing further afield in emerging markets, such as Vietnam and India, that are in need of experienced residential players to add quality and depth to the market. This will also allow such developers to balance their burgeoning portfolios.
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