Although the property market is very dull right now the malaise is not expected to continue much longer because it actually bottomed out last month with sales picking up after almost halting completely in April, says Aliwassa Pathnadabutr, managing director of CB Richard Ellis (Thailand).
The reason transactions started taking place in May is because sellers cut their prices to levels more in tune with what buyers have in mind after the Songkran unrest.
While this is encouraging, Ms Aliwassa has noticed that substantial amount of new supply has been put on the back burner with demand too having slumped. It is now very visible that foreign buyers are no longer active here with up to 80 to 90% of them having dropped off.
Fortunately locals are still buying both for their own use and investment after previously sitting on the sidelines to see how low prices would plunge. However the market turned after the Songkran upheaval because sellers decided to forgo the substantial profits they earlier had in mind.
The mark down depends on the original cost of the individual buyers but generally this is in the range of 15 to 20%. Pertinent example is the luxury condominium category with units that change hands easily in Sukhumvit area costing around 100,000 to 115,000 baht a square metre which is much lower than around 140,000 baht a square metre previously.
Another major change is that buyers have lowered their expectations where size of unit is concerned because a lot of people are less flush these days. A two-bedroom unit of around 90 to 100 square metres carrying a lighter price tag would sell well in these shaky times.
Ms Aliwassa added that it is difficult to sell very large 300- to 400-square-metre units because this is really a niche market with those who can afford to buy them being billionaires who used to live in a big house and have now chosen to move into an equally large condominium.
In general, three-bedroom units of around 140 to 160 square metres with good layout would sell briskly. Slightly more lavish three-bedroom units of around 200 square metres with all the facilities in place including a maid’s room are also faring well.
While workers and families seeking a second home are still on buying 30- to 40-square-metre condominium units near train stations, some of them who previously considered buying two one-bedroom units with future needs in mind are now opting to buy only one of them.
”While one-bedroom units sell well because the price is not too high, in reality a two-bedroom unit is something practical and is what people want the most, but it depends on whether they can afford it or not.”
The unit size is also important when it comes to renting them out with Ms Aliwassa pointing out that a two-bedroom condominium around 80 to 100 square metres would attract tenants because anything smaller would be a squeeze with this affecting the rent.
Likewise a one-bedroom unit should be around 50 to 60 square metres because anything smaller will lead to potential tenants feeling that the rent is too high.
A three-bedroom unit should be adequate for a family to live in without feeling squeezed with a good size being 150 to 160 square metres.
Also it does not matter whether a building is new or old because tenants focus on the location and facilities. As always, good decor definitely lifts the value of a unit.
While expatriate families generally opt for big units in good locations, investors have to beware that they might get lower return if they buy too big a unit in a new building because expatriate rental budget is generally 80,000 to 90,000 baht a month and at best 100,000 to 120,000 baht a month.
”We don’t have to be very luxurious and can just dabble in the general market.”
While the Japanese continue to favour the zone they have carved out in Sukhumvit which is sois 31, 33, 39 and 49 up to Thong Lor on the odd-numbered side and sois 24 and 26 on the south side, other nationalities do not have such preferences and are willing to live anywhere from Soi 1 up to Ekamai. However, they do tend to choose buildings where their own communities are housed.
It is very noticeable that the first few sois of Sukhumvit up to the Asok junction have changed and turned into an entertainment and tourist area. Ms Aliwassa observed that while apartments in this area are still renting, a lot of families have opted to move farther down from there. However, this zone continues to be popular with singles who find it very convenient to live in especially where food is concerned because they can get everything from the cheapest to the most expensive within walking distance.
With the global economic picture still so cloudy, there are currently a lot of distressed sales. To meet this need CBRE has started a ”hot deals” category on its website and properties highlighted in this slot do sell steadily.
”If it is posted as a hot deal for a week or up to a month it will be sold but it has to be a really hot deal,” she said. ”We do select [properties] and it’s not that something is not hot but we make it hot.”
Another good market is the resale of condominium contracts because this year as many as 9,800 units are being completed, a total that’s expected to drop to around 2,000 to 3,000 units in the following years. As transfers approach some of the buyers might think it is too risky to go through with the deal or might not want to part with any more money just yet and decide the sell these contracts at cost without making any profit with this being a win-win situation for both parties.
While everyone is hoping that the second half of the year will be better than the first six months, Ms Aliwassa thinks even if the situation does improve property prices will not rise but the better environment would spur demand and increase trading activity.
However if political tensions heat up again it will sap confidence once more leading to a reluctance to spend money even if people could afford to do so.
”Politics is the key issue because everyone knows the economy has reached the bottom.”
Nina
Suebsukcharoen
