BANGKOK (June 22): The property market in Bangkok will see more developers focussing on the upper-income market, especially in the downtown and midtown area. This is based on the surge in the number of units launched in the first quarter of 2015 (about 143% year-on-year [y-o-y] in the downtown area), according to CB Richard Ellis' (CBRE) Marketview 1Q Bangkok Residential report.

Developers have been focusing on the upper class purchasers who are less affected by the slow economic growth and continued rising household debt.

“Some newly launched downtown condominium projects in this quarter have set a new price benchmark — but this does not guarantee that every new downtown project will be able to achieve such high prices,” said the report.

“Overall, Bangkok condominium market sentiment will largely depend on the buyer’s confidence, the developers’ ability to transfer completed units, and the pre-sales of newly launched projects, especially in the midtown and suburban market where buyers are most affected by banks’ tighter lending criteria.”

The report added that while the number of units launched in the downtown market increased, the midtown and suburban areas fell 34% y-o-y, where it recorded the lowest rate of new launches since 4Q2011.

Despite a weak mass market, record-breaking prices and high sales rates were achieved in some newly launched condominiums in the downtown area.

According to the report, over 90% of Nimit Langsuan, a freehold condominium by PACE Development, was sold within the first month of its launch with record prices of over THB300,000 per square metre.

As for the midtown and suburban market, the majority of units launched during this quarter were by small to mid-sized companies.

“Well-known developers are currently more cautious about launching new condominium projects in the midtown and suburban areas.

“The pressure from the large number of midtown and suburban condominiums expected to be completed this year, coupled with the lower level of demand due to tighter lending criteria and reduced appetite from speculators, have contributed to the stagnant midtown and suburban condominium market,” the report said.

CBRE stated that there are over 78,000 midtown and suburban condominium units expected to be completed this year and over 32,000 units to be completed in 2016.

“The risks remain as to whether speculative buyers of these units, who have only paid 10% of the price, will default if they cannot resell before completion and how many end-user buyers will be able to get mortgage loans. Banks have continued to tighten their mortgage lending criteria. This has made it difficult for end-users, especially lower- and middle- income earners, to secure loans.

Meanwhile, more than 90% of tenants who rent residential properties in Bangkok with rents of more than THB 20,000 per month are expatriates.

“Most expatriates who come to work in Thailand prefer to rent rather than purchase property. This is because they are usually only here for a few years and it is very difficult for them to borrow money to fund a property purchase. These make buying less attractive,” said the report.

To-date, the number of expatriates holding work permits in Bangkok has increased to 78,818, as at 1Q2015, increasing by 9.5% from 1Q2014.

This number excludes diplomats and expatriates with work permits in other provinces but actually living in Bangkok, it said.

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