Thailand’s property market remains extremely buoyant despite a number of challenges it faced last year, while continuing to hold enormous potential for accelerated growth. The resilience is encouraging with takeup rates and numbers of completed developments rising and the price per square metre (psm) of condominiums climbing, enabling investors to achieve healthy returns.
The segment that is really driving the market forward is condominiums, especially in the luxury bracket, evidence that there is high demand for quality product among both overseas and local investors. Resort destinations have also performed well, despite quota and leasehold restrictions that have put the brakes on the high interest shown among the international investment community.
In recent research that covered Bangkok and key resort destinations, we can see that despite a tough political climate last year, the inner-city Bangkok condominium segment inched ahead 3% to reach 43.7 billion baht in sales.
Condominiums have clearly become the fastest growing segment in the residential market, with luxury developments emerging as an alternative for many local investors.
A second-half surge in Bangkok condominium demand brought the year-end sales tally to 6,214 new units. Achieved prices and sales performances in high-end developments were particularly strong, with investors prepared to pay an additional 50% or more on top of the median price to secure the finest inner-city properties.
Completions of new condominiums have picked up, with 5,100 units added compared to the 6,940 units launched. The supply/demand balance remains healthy with about 92% of the units in newly completed developments being sold. Performance in projects that have already started construction on the main structure and those that are still in earlier construction stages is similarly impressive.
Developers in Thailand’s resort areas remained hesitant due to uncertainties in new amendments to the Foreign Business Act. However, strong absorption from foreigners, who rushed to buy condominiums with available foreign ownership titles, pushed the total market value for resort condominiums to 17 billion baht, up 12%.
Locations close to Bangkok, where there is balanced Thai-foreign demand, were the most active. Pattaya led with 6.6 billion baht sold followed by Hua Hin with 6.3 billion.
Koh Samui and Phuket, which depend on international investors for around 90% of the demand, were greatly affected by the regulation limiting foreign allocated units to 49% of the total inventory. Although the cap is not new, there was also the fear last year that it would be further strengthened.
This prompted the postponement of new launches, especially among small under-capitalised developers who depend on early bookings. This precipitated a healthy 61% takeup rate, with buyers snapping up 96% of the units in new developments.
Resort areas are benefiting from very low availability of completed supply, driving up prices in both resale and off-plan developments. Close to a quarter of the units sold in resort areas were priced above 100,000 baht per square metre, and the number of seaview/beachfront units available for less than 100,000 baht psm is falling rapidly.
The industry confirmed the recovery sparked and as it approaches the middle of the year, it is demonstrating a vibrancy and dynamism that will continue to drive it forward. This is good news for both overseas and local investors, as superb opportunities exist in the market for buyers to achieve healthy capital gains and solid rental returns.
The research that we have completed provides detailed evidence of these trends and highlights a property market that not only has a strong competitive advantage over its regional competitors but one that is maturing fast.
Our analysis draws on a wide range of factors to present a balanced, realistic survey of current market conditions. It examines new project launches in the context of annual and cumulative unit sales, price per square metre, location, takeup rates at projects under construction and completed transfers. It also employs economic indicators to provide a more precise outlook.
While providing insight for investors and buyers, what it most clearly demonstrates is that Thailand remains a growing market with huge scope for further growth.