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Bangkok condo market takes a hit, marks new report

Bangkok condo market takes a hit, marks new report

BANGKOK: The sale of condominiums in the Bangkok area has plunged, with just over half the number of units expected to launch this year so far opening, and developers turning to discounts and other incentives to lure buyers, notes a new report by Knight Frank Thailand.

By The Phuket News

Friday 22 May 2020, 03:56PM

Risinee Sarikaputra, Director of Research and Consultancy, Knight Frank Thailand, said that the condominium market in the first quarter of 2020 has been relatively slow in terms of both supply and demand – due to COVID-19.

The outbreak began in late January 2020, and in March, it became more severe. As a result, from mid-March to April, there were no new condominiums launched for sale in Bangkok.

Projects that had planned launches postponed them to the last quarter of the year. As many companies implemented a work-from-home policy for employees, the sales offices of many condominium projects closed and stopped services. Customers could, however, view the projects by calling in advance, explained the report, released on Wednesday (May 18).

The sales approach has shifted to the digital platform; many companies are now using applications to communicate with customers, including sales via LINE, websites and apps, with virtual project visits via VDO call, Live Youtube, and Facebook or unit reservations using various online booking formats.

The data collected on new condominium launches at the end of March showed that in 2020, there should be around 11,000 to 12,000 new condominiums launched for sale in the Bangkok area. This marked a decrease from the 20,000 condominium units that at the beginning of the year were expected to be launched. The fall also marked a decrease of up to 80% when compared to the past eight years, which saw an average launch of 60,000 units each year. 

In the first quarter of this year, it was found that there were about 6,007 condominium units already launched for sale – and the number of new units launched has decreased by 53.4% when compared to the first quarter of the previous year. The main reason for the new supply decline is due to the outbreak of COVID-19, especially in March; the outbreak has since intensified.

Newly launched condominiums in the first quarter of 2020 include Grade C condominiums (selling price lower than B80,000 per sq.m.), representing 58% of the total launches, followed by Grade B condominiums (selling price between B80,001 - 150,000 per sq.m.), representing a 27% ratio, and grade A condominiums (selling price > B150,000 per sq.m.) at 14%. Prime and super prime condominiums only comprised 1% of the new supply.

In regard to location, most of the newly launched condominiums are located in the suburbs of Bangkok, accounting for 56% of the total, followed by condominiums located around central business areas (City Fringe) at 28%, and condominiums located in the central business district (CBD) at 16%. 

The outbreak of COVID-19 resulted in a clear decline in purchasing power in new condominium projects launched in the first quarter of 2020. Only 1,791 units were sold from the new supply during the first quarter of this year from a total of 6,007 units, representing a 30% sales rate – and reflecting a 9% drop in sales when compared to the same period in the previous year or a 20% decrease when compared with the previous quarter.

In March, the outbreak of COVID-19 was especially severe, resulting in a decrease in the number of people visiting projects. In addition to new condominium sales decreasing, concerns remain about the number of condominium transfers for projects that are completed and ready to be transferred this year amidst the nationwide lockdown. 

As such, almost every business stopped close to 100% of their activities. Naturally, when businesses stop operating, there is an inevitable effect on employment in various business organisations. In some cases, businesses have decreased their employee numbers and reduced the salaries of employees. In turn, this has caused many people to lose their jobs, lack in income or have reduced income.

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Buyers may be unable to complete their transfers, as banks are also more cautious in granting loans for real estate. It is expected that the loan rejection rates are likely to increase this year.

For the survival of each company, it is apparent that many operators are trying to engage in marketing schemes to create sales, including discount promotions from 20% up to 50% for some units in the project – in order to try to attract customers to visit the project.

In addition, there are many other promotions, such as waiving of charges on the day of transfer, which includes the transfer fee of 1% of the appraised price (only for customers), stamp duty fee, installation and insurance fee for the electricity meter, common facilities fee for one year, and initial capital fund contribution.

In addition, some companies have promotions that attract both investors and those who buy residences for their own occupancy (real demand), which include coverage of two years of instalment payments.

For customers who have already bought condominiums and are in the process of making their down payment, many companies implemented measures to help, as many of the customers from temporarily halted businesses, like hotel staff, airline staff, restaurant staff and department store staff, may be experiencing the difficulties of having no income. Many companies have helped customers who are having problems with the suspension of temporary down payments, beginning at three months.

However, the slowdown in real estate has been good for investors with savings and cash in their pockets; such investors have taken this opportunity to buy condominiums at prices that have been reduced to below market rates, in order to make a profit when the economy has recovered.

As some projects only take the reservation payment and the rest of the payments when ownership is transferred, an investor can purchase a unit in such a project with a two-year instalment payment promotion. They will then not have to pay anything out of pocket for two years when the economy has not yet recovered.

Ms Risinee touched on that the trends of the condominium market in Bangkok, remarking that, in the remaining nine months of this year, the launches of new condominiums for sale will slow down – especially the large condominium projects and high-priced condominiums, large-scale projects that require more than five years to develop, and condominiums that focus on selling to investors and foreigners.

Condominium projects launched for sale this year will focus on selling to buyers with real demand. The selling price level will not exceed B100,000 per square metre. The trend of condominiums is likely to slow both in terms of supply and demand, and It is expected that it will take another two years for the condominium market to improve.

There are still around 100,000 units remaining units for sale in Bangkok. However, the delay in the launches of condominiums will benefit the market in Bangkok, providing opportunities to sell outstanding stock. Also, postponing the launch of new projects would result in reduced competition in the market.

As for condominiums that will be completed this year, it has been found that operators are trying to reduce prices in order to attract customers. The condominium market at the moment is considered to be a buyer’s market, where the buyers’ bargaining power can push condominium price levels below the market prices; buyers would subsequently be able to resell their purchases at a good price in the future when the economy has revived.

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