High-end Condo market losing steam!
Finally! A property broker that admits Bangkok’s high-end property market is struggling. When you look around Bangkok today there are several new condominiums costing THB 100,000 – THB 150,000+ per sqm, that have all been fully sold out, but a quick glance inside the buildings and you’ll find that the majority of units have very few actual tenants living there.
There’s a very simple reason for this, the wealth in Thailand is concentrated within a very small percentage of the population, I remember a factoid that 0.7% of the bank accounts in Thailand represent 80% of the value of deposits here, but please don’t quote me on this.
Because of this, condominiums can be 100% sold out and yet remain largely tenant free. Most of these buyers do not need capital immediately and are willing to wait decades before achieving a return on their investments. This demonstrates that there isn’t a real demand for these price point units/developments in Bangkok. With the average salary in Bangkok @ ~THB 30,000/month, it is impossible that they will be able to purchase a small 1 bed room (~35sqm) costing THB 3.5 mn, @ a 90% LTV, 30yr mortgage, results in them paying ~THB 21k monthly to the bank. You can see how this is a problem.
So no, we aren’t surprised that there is a problem, this is why we are avoiding a property company like Sansiri Plc despite good management and the stocks cheap valuation but their business is just far too focused in this area.
Article:
As the high-end condominium market remains sluggish, there are a number of resale units available in the Ekamai area, and the developer Gaysorn Property Co has had to maintain unit prices of its Mode Sukhumvit 61 since its launch in March this year
Source: Bangkok Post : High-end condo market losing steam http://bit.ly/okPjDB
peter tan
I do agree with this as one of my mates living at one of the Sansiri Condo along Sukhumvit road, near to Thonglor, I hardly see more than 25% of the light inside the apartment is on during the evening,yet it was sold out. I seriously think that the Rich is indirectly pushing the property price up way beyond the reach of an average salaryman.
I wonder if city planners are doing a good job to ensure everyone get a affordable home or just to ensure the rich owe multiple home
CH
not only for the high end condo.. in fact… i have been looking around and the killer part is you just need 10K to book a unit, and thereafter contribute to the sinking funds etc…
booking fee of 10K! everyone is hoping to get a unit and then flip it…
if that’s the case… you are looking at 100% unit sold then 90% then 80% as more and more dropped out because of their inability to contribute to sinking fund…
found one unit that’s pretty good… 19th floor… asking for a 20% markup pricing…
ridiculous…
peter tan
very true, I did noticed this trend !!! Esp among listed property developers whereby projects listed sold-out within 6 months of launch. But when the development is completed, buyers who can’t pay the full sum or flip it will end up suck their thumbs and suffer. While the developers re-sell the units again.
Pon
Thanks for the comments.
Yes there are “a lot” of speculators in the Thai condominium property market but it does vary between the types of projects. If memory serves me correctly Raimon Land Plc and LPN Development Plc both said that speculators are officially 20% of their buyers in projects.
In your comment re city planning, it doesn’t exist in Thailand, although now they are trying to limit the types of buildings (i.e. high-rise vs low-rise) that can be built. Have a look at my co visit with Charn Issara Plc http://thaicapitalist.com/2011/08/company-visit-charn-issara-plc-ci/ K. Songkran (the ceo) had great thoughts about the lack of regulations of the property/hotel industry in Thailand.
Howard WOON
This is why the major banks feel more confident lending to buyers of LH properties ‘cos they are serious buyers looking for a place to live in.
When a sales person at a condo tells me they’re going to increase the price very soon and therefore I should buy immediately for the deal of a lifetime, my usual reply is “well if that’s the case, you should keep the unit and sell it when you increase the price so your company can make more profits!” It’s amazing all these sales talk out there, and even more amazing fools rush in!
Pon
Absolutely, LH is a true barometer of genuine property buyers in Thailand for their single-detached houses.