Second Time Around
01 Apr 2018
Sky-High Prices of New Bangkok Condos May Drive Demand for Units in Well-Maintained Older Projects
Residential condominium prices in prime downtown locations of Bangkok are reaching new highs almost every 6 months for the past two years. The increase in prices has driven the cost of ownership out of the budgets of many buyers which has led to a renewed interest in well located and well maintained older projects in comparably prime locations.
The reduced performance in the low to mid markets has and continues to lead many developers to plan and launch projects in the high end to luxury segment located in prime Bangkok downtown areas. The competition to carve out a piece of the luxury market led to a frenzy of land purchasing which rapidly drove up the cost of land in prime downtown Bangkok areas resulting in high development costs. These high development costs led to smaller units in most cases to keep the total cost of purchase lower for buyers. Today, one-bedroom units average around 35 - 45 square metres, compared to older projects that average around 50 - 60 square metres, and new products have per square metre costs from THB 250,000 to over THB 300,000 for luxury projects found in downtown along Sukhumvit, Thonglor, Central Lumpini and Silom/Sathorn areas. Leasehold properties are generally approximately 20%-30% cheaper than equivalent freehold properties and only exist in super prime locations like Langsuan, Lumpini or the riverside.
These rises in new property prices has been a blessing for owners of older properties, for properties that are well located and well maintained. The rise in new property prices has also had a pulling effect on the prices of the resale property market as well. For example, a 103-square-metre unit with one bedroom in the Lake Avenue located in Sukhumvit Soi 16 not far from Asoke is currently selling for around THB 96,000 per square metre. This project was launched for THB 50,000 per square metre in 1994. Wind Sukhumvit 23 is another, newer example, also not too far from the Asoke Intersection. It was launched in 2009 for THB 80,000 per square metre and is currently asking THB 137,100 per square metre for a 54-square-metre unit with one bedroom. In comparison, a one-bedroom unit in the recently launched CELES Asoke, which is located near the Asoke/Sukhumvit intersection is selling for around THB 250,000 – THB 260,000 per square metre with a one- bedroom unit sized around 34 square metres.
While the prices of both the older projects listed above have risen around 3.8% and 7.9% per year respectively, they are still around one-third to half the price of new project counterparts. As a result, many buyers, especially local buyers looking for a downtown home or secondary residence, may consider older projects as an alternative to the higher prices of new projects. They can still obtain a nicely laid-out unit with decent material specifications and larger square metre sizes for substantial savings over a new property on a baht for baht value comparison.
CBRE Research also recorded that over 60% of new condominium units under construction in the fourth quarter of 2017 in downtown Bangkok were one bedroom units, which means that options for larger units are scarcer and notably pricier. This trend will also support interest in well maintained, excellently located, and designed older projects which generally feature larger units with a price savings.
However, not all older projects have garnered the interest or benefitted in steadily increasing property values. Four main factors will have the biggest impact on the attractiveness of older projects which include location, maintenance, price, and layout/design.
Older downtown projects that can compete with newer projects need to be in excellent areas of downtown. This doesn’t necessarily mean being located on a big road like Sukhumvit or even very short walking distance to the BTS or MRT (although that is always beneficial), but it does mean that the project is in a nice neighbourhood with plentiful amenities such as grocery stores, food and drink options, and conveniences such as salons, spas, laundromats, and other such amenities. These types of locations will make living in the area especially convenient and attractive to renters or buyers, especially foreigners, as they can keep their lifestyle conveniently centralized around their home. Therefore, areas such as the sois on the early parts of Sukhumvit between Chidlom and Thonglor/Ekamai or main hubs such as Chong Nonsi and the Silom/Sathorn areas as well as Central Lumpini are popular.
On the other hand, many older buildings, even if located in good areas with attractive prices, do not appreciate or resale easily because the units are poorly laid out or the building has not received appropriate maintenance. Older units often boast large unit sizes, but due to poor layout, the liveability of the units is not good with a lot of the space being unusable. Older buildings often have very low ceilings of around 2 - 2.5 metres and small windows compared todays standard of 2.7+ metre ceiling heights or greater and larger floor to ceiling windows. Good buys will be in older condominiums built during 2005 - 2010 where the designs had already been modernized. In these slightly newer projects the prices are still under THB 200,000 per square metre.
Owners of condominium units in projects that meet the above aspects of good location, good maintenance, and reasonably well designed (and more spacious) layouts will have a better chance of standing out from other resale units when listing on the market, and with prices of new, and smaller, units becoming untenable for many buyers, the older project units have an opportunity to thrive in the crowded resale market, especially from buyers looking for a downtown residence for their own use.
This is a special article written by Aliwassa Pathnadabutr, Managing Director of CBRE Thailand for Bangkok Post’s Spectrum dated 1 April 2018.