Mr. Nattha Khahapana, Managing Director of Knight Frank Thailand Co., Ltd. stated that the condominium market in the second quarter is gradually recovering continuously in response to the improving economy, despite facing rising construction costs. Additionally, inflation rates continue to rise with no signs of decline. Although this is beyond control, developers are still consistently launching new projects. This aligns with the current business sentiment index for residential development, which stands at approximately 49.8, up from 47.1 in the previous quarter, reflecting an increasing confidence among developers in project development.

Developers are employing marketing strategies to close sales as quickly as possible. In this quarter, many projects are targeting the lower market segment, focusing primarily on affordable pricing to gauge market response and inform future project developments. For completed projects ready for occupancy, there are promotions to assist with payments for the first 1-3 years to facilitate buyers' decision-making. However, the rising cost of living may cause concerns among lower-income buyers, limiting their budget for mortgage payments, which could weaken the real demand purchasing power. Nonetheless, there remains a group of investors who can drive market activity during this period.

Supply

In the second quarter of 2022, the condominium supply in Bangkok totaled 15,164 units, with new sales units increasing by 470.3% compared to the same period last year (new condominiums launched in the second quarter of 2021 were 2,659 units). However, this represents a decrease of 6.7% compared to the previous quarter. The newly launched condominiums have an average selling price ranging from 40,000 to 75,000 Baht per square meter, with C-grade condominiums accounting for 68% of the total units launched this quarter, all located in the suburban areas of Bangkok, which represents 88%. In contrast, the City Fringe area accounts for 7%, and the Central Business District (CBD) only 5%.



Demand

In the past second quarter, successful pre-sale projects were those located in areas with potential near amenities, with relatively low selling prices per unit. Projects near educational institutions also reported good revenue recognition, with new sales units in the second quarter totaling 5,080 units from the new supply of 15,164 units, resulting in a sales rate of 33.5%. The sales rate decreased by 3.8% compared to the same period last year and by 10.0% compared to the first quarter of the year. The decline in new sales units is attributed to the high number of units per project, with sales being limited to specific buildings and floors. Many projects show positive sales trends, but the high ratio of sold units to total project units results in a lower sales ratio. During this time, buyers are primarily investors looking to rent or speculate, comparable to the Real Demand group.

Sales Prices

The selling prices of condominiums in the second quarter of 2022 increased slightly. The selling price of condominiums in the Central Business District is 239,955 Baht per square meter, unchanged from the previous quarter. Meanwhile, the selling price of condominiums in the City Fringe area is 116,115 Baht per square meter, reflecting a 0.3% increase compared to the last quarter or a 6.0% increase compared to the same period last year. The selling price of condominiums in the suburban areas of Bangkok is 63,815 Baht per square meter, up 0.6% from the previous quarter or 6.8% from the same period last year. The average price across all areas increased only by 0.3% due to some projects adjusting prices for certain units, while the average selling price for most projects remained as initially set by developers. It is anticipated that prices in the third quarter will likely increase by 2-3% due to inflation affecting material costs, resulting in higher construction costs that developers must bear.

Outlook

In the second half of the year, real estate developers are expected to continue launching projects, focusing on both high-rise and low-rise developments. A key factor for the growth of the condominium market is positive feedback from buyers across all segments. However, suitable land for development in Bangkok is becoming scarcer and harder to find, particularly in areas with infrastructure connecting to the eastern side or in suburban areas with expanding rail lines and proximity to new expressway routes. Even in the suburban areas of Bangkok, access to these amenities will drive housing demand. Currently, land with such potential has seen price increases, which may intensify competition among developers who must bear multiple cost burdens, leading to increased selling prices per unit, potentially affecting the recovery of the real estate sector.

Meanwhile, the central bank's announcement of interest rate hikes to curb inflation may directly impact potential condominium buyers, as borrowing capacity decreases while housing prices remain high. The rise in interest rates will increase borrowers' monthly payment burdens, potentially slowing housing demand and leading to negative transfer of ownership figures. Nevertheless, the government is prioritizing and seeking various measures, including reducing transfer and mortgage fees for residential properties up to the first three million Baht, with the excess subject to a normal rate of 2%. The price ceiling remains to be monitored, along with measures to relax LTV regulations, which were initially set to end in late 2022. However, this presents a good opportunity for domestic buyers at this time, as these measures will help stimulate domestic purchasing power to keep the real estate market moving while waiting for foreign buyers to return fully. The hope for the recovery of the real estate sector lies in the purchasing power of foreign buyers, which will lead to a more vibrant and fluid condominium market.