Pattaya seeing a slowdown as supply jumps significantly

The market is becoming increasingly more sophisticated and modern, says Mr Collins.

The market is becoming increasingly more sophisticated and modern, says Mr Collins.

Pattaya is currently witnessing a slowdown with a very significant volume of new supply entering the market in 2008 and a lot more in the pipeline for 2009, says Robert Collins, managing director of Savills (Thailand) Limited.

The sheer volume of space at this point is likely to exceed the level of end-user demand in the resort city, given prevailing economic conditions. Prices have also risen sharply in the last six months, partly on the back of recent launches, notably Raimon Land Plc’s The Lofts Southshore and the Waterfront project by the Elran Group of Israel.

This price escalation comes at a time of increasing construction costs, though Raimon’s earlier project, Northpoint, achieved a very high actual sales rate toward the end of its marketing campaign.

“What we have seen at Northpoint, which was launched at a time when the market was extremely buoyant, is that the pricing escalated at a more natural level, starting low and finishing high,” said Mr Collins.

“You could say that the new projects that have come online basically established their launch price at what can be considered some of the highest price points achieved in the market so far.”

Illustrating this rapid price increase is the jump at some condominium developments from a range of 70,000 to 80,000 baht per square metre a year ago to expectations of 100,000 to 140,000 baht today.

While this reflects very good growth in this period, Mr Collins feels they are very high prices for the hundreds of units in these buildings, which for the most part are not boutique developments.

“I think a boutique building on a pure beachfront could support this price point but these are mass-market products at very high price points relative to the marketplace.

“However it’s fair to say that the new product coming online is clearly an advancement in terms of quality and concept design over the existing supply so the market is becoming increasingly sophisticated and modern which will help.

“The underlying issue is that globally we are seeing property prices fall in most marketplaces including Asia, and it may become quite a challenge for the Pattaya market to buck that trend.”

Raimon Land’s Northpoint condominium achieved a very high actual sales rate toward the end of its marketing campaign.

Raimon Land’s Northpoint condominium achieved a very high actual sales rate toward the end of its marketing campaign.

Even so, Savills has seen a rapid change in buyer demographics in the last 18 months with Russians now playing a noticeable role, aside from the British. While there is a broad range of British buyers, there is a trend for male divorcees to drift here but they generally aim to buy at the mid-range level rather than the high end.

On the other hand, Russian buyers for the most parts are not owner-occupiers and typically are buying off-plan. While this is good for off-plan sales, the emergence of a large non-resident investor group has yet to be fully understood.

“The emergence of the Russian marketplace so far has been genuinely significant and we are seeing that the vast majority of developers are all targeting the Russian buyers,” said Mr Collins. “So the Russian buying pool, which in light of how the Russian stock market has been performing for a few weeks, will inevitably be smaller and we have to assume that there will be fewer Russian buyers out there.”

Mr Collins added that other well-heeled foreign buyers might now look at more mature markets in US, UK and southern France for holiday homes because prices are falling even as they are being pushed even higher in Pattaya.

The launch of large new high-rise developments in Pattaya also marks a switch back from housing to condominiums and this again raises the inevitable problem of selling the 51% Thai quota. The fact is, it has been very obvious that for most of 2008 Thai buyers have been quite thin on the ground in Pattaya.

“This may just be a reflection of the sheer volume of new developments out there spreading the Thai property segment increasingly thinner across a wider market share.”Despite this, market observers have seen the trend of Thai buyers gravitating toward Hua Hin in greater numbers in recent years. This means that developers of Pattaya’s high-rise condominiums have to focus strongly on attracting Thai buyers aside from having to create landmark buildings in order to secure high prices – a challenge that perhaps has been overlooked.

However, some developers may use their Thai-quota units as serviced apartments and thus turn their developments into mixed-used complexes. While this does look promising, the resort has still to see any significant retail-residential mixed-use projects.

Mr Collins also observed that developments now encompass a far wider area all the way from Wong Amat beach to Jomtien and Bang Saray. In tandem with the improved quality of developments in the last three years is the introduction of high-rise condominiums even in emerging locations where cheaper land values have not led to the adoption of more low-rise designs that one would expect of such locations.

“It’s a very high-rise property development market place, more akin to Miami Beach, that seems to be the direction the market is going,” he said.

While there are very clear guidelines on building high-rises in Pattaya, these differ from other resorts. Samui, for instance, has very strict planning controls with a four-storey height limit.

“Pattaya has planning controls but it’s a very different environment. You can go much higher, though you have to observe the setback and plot ratio regulations.”

It also seems that the big property players are mainly focusing on Pattaya and not on neighbouring resorts such as Bang Saen or Rayong.

While Bang Saen continues to be a very Thai destination, Rayong is that much farther away to drive to and cannot compare with Pattaya in terms of shopping and nightlife.

“Bang Saray sits in isolation at the moment and will hopefully develop on its own track,” said Mr Collins.

About the author

Nina Suebsukcharoen Nina Suebsukcharoen
Nina Suebsukcharoen is a senior journalist with The Bangkok Post, Thailand's first English language newspaper and specialises in the property and real estate sector.
Other posts by Nina Suebsukcharoen ( 30 )

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