Is the Real Estate of Bangkok Picking Up again? May 2010

The unsold properties inventory has gone up by nearly 3 percent due to the unrest in the end of last year. It was the time when a number of new projects had been launched based on the forecast of the prevailing demand. This also affected the increase of the unsold properties.

Survey by “the Nation” for the 25 listed property firms of Thailand Stock Exchange, reports an inventory growth of 2.9%. This takes into consideration the consolidated amount of BHT 140.9 billion in the month of December 09 to BHT 145.1 billion at the end of March 10. The survey by Real Estate Information Centre (REIC) reports an inventory of BHT 100 billion of properties in Bangkok and its suburbs. Based on economy growth of 3 to 4 percent it will take more than two years to sell the properties. In a range of 66,000 to 75,000, residential units are sold in Bangkok and suburbs every year valuing between BHT 120 billion to BHT 150 billion.

According to financial results submitted for the year end March, the leading property firms have shown an increase of inventory. The Land & Houses has an inventory worth BHT 24.1 billion 5.2% increase, Sansiri inventory worth BHT 16.2 billion 20% increase and Asian Property Development inventory worth BHT 16.1 billion up 2.5% from the end of December.

Most developers also sped up their construction of residences in the first three months of this year, so they could transfer homes to new owners before the government’s taxation incentives for the property industry expired at the end of March. Government has extended the incentives. The outcome of which is the rise in residential inventories.

The residential inventories in Bangkok and its suburbs will continue to rise in the second quarter since most home-buyers have delayed their decision to buy a residence because of the political riots.

Sena Development was thinking of delaying the launch of a new condominium in Lat Phrao. This is despite the strong demand in Lat Phrao area. The final decision will be taken on the basis of supply and competition in the area. The presale has already dropped by 20 to 30% in the second quarter in comparison to first quarter. At present the backlog is of BHT 1.1 billion out of which company expects to realize BHT 800 million by end of the year. Besides launching 6 new projects company is proposing for land purchases of BHT 700 million to 1 billion. The company has bought plots worth BHT 280 million in urban areas.

The company is contemplating the investment feasibility in rental apartments with commercial spaces in Charoen Krung area. At present the company is getting marginal percentage of its total revenues from only rental apartment on Phahon Yothin Road.

Another developer Sansiri Plc which is in low cost condominium segment has plans of 10 new condominiums for BHT 17.6 billion with targeted unit’s price below BHT 80,000 per square metre to tap demand for mid to low condominiums. All projects in this range were sold in first half of the year of being launching.

As per the survey of the company, there is shift of demand from low rise to high rise condominiums. They expect 23,000 such units are in demand. The company mentioned that the share of condominium units, townhouses and single houses stood at 50%, 30% and 20%.

The company proposes to market D condo brand low-end segment for BHT 1 million of 25 square metre units near sky train extensions in Taksin and Sukhumwit Road. 4 new projects with units priced from 80,000 BHT to 100,000 BHT per sq metre will be launched. A luxury project will be priced above 100,000 BHT.

The company had launched two new condominium projects priced 80,000 BHT per sqm in which they were able to sell 650 units at average price for BHT 6.5 million. Sansiri next month plans to launch Wayne Sukhumwit, a new condominium project worth BHT 1.85 billion. Located in the Phra Khanong area, it will comprise 460 fully furnished units sized from 30 to 65 sqm with prices starting at BHT 2.9 million a unit.

The comparison between the two developers shows the difference that high valued units’ demand has declined however low cost units’ sales are up and are unaffected by the recent violence. Apart from this the outskirt areas have not shown negative bias as the prices may be cheap comparatively.

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