Bangkok Condominium Market Q1-2011

Q1 2011 | Condominium

thailand

Bangkok Condominium Market REPORT

Bangkok Condominium Market Executive Summary New launches in Q1 2011 fell to a more sustainable level following the frenetic previous six months.

Concerns of an overheating property market have been allayed as a result. The condominium market has begun the process of consolidation.

Within urban Bangkok, the Northern and Southern fringes led the way in new launches with around 15% each for the total of the whole of Bangkok. The Suburban area accounted for around 56% of the total. market indicators Q4 2010 - Q1 2011 new Supply LAUNCHES PRICES TAKE-UP

Around 3,500 units were supplied in Q1 2011, a slight decrease q/q. For the past two years, quarterly additions to new supply have been remarkably stable.

The earthquake in Chiang Mai in March 2011 caused many potential buyers to pay attention to the resilience of buildings to damage from such events. More may be required to address these concerns although Bangkok is far from areas prone to serious seismic activity.

Newly launched condominium units during the year 2010 – Q1 2011 by quarter

Source: Colliers International Thailand Research

New launches for Q1 2011 were down compared with the previous quarter by around 46%. Just under 10,800 units were launched in Q1 compared to around 20,000 in Q4 2010. At the end of last year, there were worries that the market was beginning to overheat with the substantial number of new units being launched. The Bank of Thailand sought to cool the market with a regulation limiting the maximum loan to value (LTV) to 90% for condominiums priced below 10 million baht. This, coupled with small increases in interest rates, has had the effect of cooling the market.

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Bangkok condominium Market REPORT | Q1 2011 Newly launched condominium units in Q1 2011 by location

Source : Colliers International Thailand Research

In Q1 2011, the Suburban Bangkok area trumped urban Bangkok with the higher number of units launched. Many projects in the Suburban Bangkok area contain over 600 units.

of each location from the total. The City area was third, with 600 units.

The Southern Fringe area number was on the back of one large-scale project, The Trust Ratchada Rama 3.

Within urban Bangkok, the Northern Fringe and Southern Fringe areas have shown the highest numbers with approximately 1,600 units or 15% Additional Supply by Quarter

Source: Department of Land, Colliers International Thailand Research Remark: The number of units does not include projects from the National Housing Authority

Approximately 3,500 new condominium units were completed and registered at the Department of Land in Q1 2011 and the total number of the whole of Bangkok was approximately 300,000 units, and more than

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39,500 units are scheduled to be completed in 2011. The number of condominium units under construction and scheduled to be completed in 2011 is the highest since the global financial crisis in 1997.

Bangkok condominium Market REPORT | Q1 2011 Total Historical Supply by Location to 1Q 2011

Source: Department of Land, Colliers International Thailand Research

More than 195,000 condominium units, around 65% of the total, are located in the Suburban Bangkok area. Within the urban Bangkok area, the Northern Fringe contains the most units due to its proximity to the city centre, mass transit connections and relatively lower land prices

compared to the City area. The Outer City areas are appearing on the radar screen due to the extension of the BTS across the Chao Phra Ya river and along Sukhumvit road and this is set to continue.

Future Supply – Urban Bangkok Cumulative future supply scheduled to be completed during 2011 – 2013 by location in urban Bangkok (as of Q1 2011)

Source: Colliers International Thailand Research Remark: Supply does not included units in Suburban Bangkok

Approximately 21,150 units are scheduled to be completed during the rest of 2011. The Northern Fringe area continues to be the main player in urban Bangkok, with nearly 8,500 units scheduled to be completed in

2011, followed by the City area with around 6,200 units. It is expected that the Northern Fringe will continue to dominate supply for the early part of the decade in urban Bangkok.

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Bangkok condominium Market REPORT | Q1 2011 Take-up Average sales proportion of newly launched units in Q1 2011 by location

Source: Colliers International Thailand Research

The occupancy rate in the Suburban Bangkok area was the highest, followed by the Eastern Fringe and Outer City - East areas. The positive figures for the Eastern Fringe are the result of a popular newly launched

project from Sansiri. The On Nut-Bearing extension line is close to the date of the official opening in August 2011 and this spurred take-up in the Outer City - East area.

Launches with high take up rates in Q1 2011

LPN returned to the number one spot in the condominium market in the first quarter of 2011 with three projects in two locations, although both locations are in Suburban Bangkok. LPN launched two projects at the same time. Lumpini Ville Lasal – Barring on Sukhumvit 105 Road has 1,028 units and showed the highest take-up rate of almost 100%. Another

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project by LPN is Lumpini Condotown Nida – Serithai, located on Serithai Road, with a total unit of 593 units and one of the highest take-up rates.

As a result LPN launched a new project, Lumpini Condotown Nida – Serithai 2 opposite the first project with 750 units. The new project also has a high take-up rate.

Bangkok condominium Market REPORT | Q1 2011

U – Delight 2 @ Bangsue Station by Grand U Living Co., Ltd. is located on Prachachuen Road in the same location of U – Delight @ Bangsue

Station with a total of 645 units in the Suburban Bangkok area and had a high take-up rate of more than 80% shortly after the initial launch.

Average Selling Prices of Newly Launched Projects by Location, Q1 2011

Source : Colliers International Thailand Research

The average selling price in the City area is the highest at more than THB 95,000 per sq m, however this is nearly 13% lower than the average selling price in 2010. This was due to less prestigious projects being

launched in Q1 2011. The average selling price in the Northern Fringe and Eastern Fringe areas are similar due to the land price and the similar mass transit system provided in the area.

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Bangkok condominium Market REPORT | Q1 2011 Mass Transit Effect Take-up rate of newly launched projects by proximity to existing mass transit lines, Q1 2011

Source: Colliers International Thailand Research

The take-up rate of projects more than 1,000 metres from the BTS / MRT systems was the highest, at around 50%. Projects less than 200 metres from the mass transit system had the lowest take-up rate,

because although the projects are close to the BTS / MRT lines, the selling price was often higher than other areas.

Average Selling Prices of Newly Launched Projects by Proximity to Existing Mass Transit Lines, Q1 2011

Source: Colliers International Thailand Research

The average selling price of projects not more than 200 metres from BTS / MRT lines was higher by 55% - 134%, which directly affected

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take-up rate.

Bangkok condominium Market REPORT | Q1 2011 Financing Housing Loans for Personal Consumption Extended by Financial Institutions

Source: Bank of Thailand and Colliers International Thailand Research Note: Excludes negligible amounts of financing from other sources. Percentage change is comparable quarter-on-quarter.

The growth rate of housing loans increased more than 3% in Q3 2009 – Q1 2010 because the government’s incentives attracted buyers to purchase and transfer by the second quarter of 2010. This boosted

housing loans in that period compared to other periods. The amount of loans in 4Q 2010 increased more than 2%, due to the new loan-to-value limits from the Bank of Thailand that took effect on January 1, 2011.

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Bangkok condominium Market REPORT | Q1 2011 SWOT Analysis Strengths The market is dominated by large, listed developers with a strong reputation and a focus on the bottom line. This means greater economies of scale, improved financing options and projects that are relevant to market conditions. However smaller players can still successfully enter the market and add a certain innovation and creativity to the mix.

Highly popular condominium and housing exhibitions as well as frequent coverage on the housing market from the press help to keep the topic in the front of potential buyers’ minds and help stimulate further demand.

Developers are targeting different income segments and demographics with increasingly sophisticated branding which enlivens the buying experience. Greater efforts have been made in producing quality showrooms that provide buyers with a better insight into the products they are interested in buying.

Bangkok is the capital city of Thailand and a centre of work and education, so many people from other parts of Thailand move to live in Bangkok.

First time buyers still remain a potent force in the market especially in the lower end of the market.

Demographics also point to a growing number of plus 50-year-old buyers who may be seeking to upgrade to better quality units in good locations due to increased spending power and extra capital from inheritance.

In the longer term, the integration of ASEAN over the decade could lead to more wealthy individuals from those countries purchasing higher end units in Bangkok where they are likely to operate from. This could generate demand in the latter half of the 2010’s. Further interest could be seen from personal investors from India and China.

Threats Weaknesses Some condominium projects in Bangkok were starting to be sold prior to EIA (Environmental Impact Assessment) approval, therefore many projects are forced to change the design and floor plan, reduce the number of floors or units in order to comply or even be cancelled altogether, although they may have sold out already. EIA approval is one of the main concerns for buyers and many developers are now advertising EIA approval in their signage and advertising literature.

Opportunities The condominium market in Bangkok has room to grow, especially along the new BTS extension lines that are not too far from the city. Eventually the further the lines are from the city the more likely landed property will be the mainstay of new residential developments due to cheaper land prices.

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The earthquake in Myanmar in March 2011 was not far from the northern border of Thailand and it affected some high-rise buildings in Bangkok.

The day after the disaster, many people were worried about the security of high-rise buildings in Bangkok and this directly affected the confidence of people interested to buy a condominium unit. Although many developers announced that their own projects were safe, some buyers still postponed their decision. Although some form of earthquake protection has been included in construction permits for the past few years, no exact criteria has been established and it is unknown to what extent building can withstand a magnitude 5.0 earthquake measurement of intensity. However, Bangkok is not located on an earthquake prone area and are currently built to withstand wind force.

Commodity prices are causing inflation to creep up and along with economic growth, further pressures to raise interest rates could cool the market even more further into the future.

Bangkok condominium Market REPORT | Q1 2011

APPENDIX

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Bangkok condominium Market REPORT | Q1 2011 ZONING HISTORICAL SUPPLY BY YEAR

cumulative supply in Bangkok

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Bangkok condominium Market REPORT | Q1 2011 • CITY AREA The area covers four adjacent but competing sub-markets: the Sukhumvit section comprising Sukhumvit Road between Soi 1 and Soi 55 to the north and Soi 2 and Soi 38 to the south; the Central Lumpini section including Phloen Chit Road, Rama I Road, Soi Langsuan, Soi Sarasin, Chitlom Road, Ratchadamri Road, Witthayu Road and Rachaprasong Road; the Silom / Sathorn section; and the Riverside section fronting the Chao Phraya River along Charoenkrung Road and Charoennakorn Road, where several five-star hotels are located. The City area is convenient for businessmen, expatriates and tourists, because of its proximity to many office buildings, retailing and local attractions.

• CITY FRINGE AREA This area covers three parts of Bangkok: Northern Fringe: This section covers the BTS route starting from Ratchathewi Station to Mo Chit Station to the north and the MRT route starting from Petchaburi station to Bangsue station to the north.

Southern Fringe: This section covers Narathiwad Ratchanakarin Road, Chan Road, Sathupradit Road, Charoenkrung Road and Rama III Road along the Chao Phraya River.

Eastern Fringe: This section covers the BTS route starting from Thong Lor Station to On Nut Station to the east, Rama IV Road and Petchaburi Road,

This area covers locations with their own local infrastructure and convenient transportation. However, commuting is required to have access to the central business and entertainment areas.

• OUTER CITY AREA The area covers two parts of Bangkok: Outer City (East): This section starts from the extension of the BTS route at On Nut Station to the Bangkok boundary to the east.

Outer City (West): This section starts from the extension of the BTS route at Taksin Station to Bang Wa station, which includes the area from Krung Thonburi Road to Ratchaphruek Road near Petchakasem intersection.

• SUBURBAN BANGKOK These are the environs outside the areas already mentioned. Expansion of the mass transit system is the main determinant for increasing future supply in a particular area. The expansion from On Nut to Samut Prakarn is scheduled to be completed in 2011. The expansion of the BTS will benefit directly the surrounding condominiums, as it will considerably reduce transportation costs and time. This will encourage the development of new condominiums in this area. Suburban Bangkok represents the biggest area and for the purposes of this report and includes Bangkok city’s old town (Koh Rattanakosin area and boundary area). This location has comprehensive town planning controls restricting building height, so there are no condominium projects in the area.

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Bangkok condominium Market REPORT | Q1 2011 COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM

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researcher:

researcher:

Thailand Antony Picon Associate Director | Research email antony.picon@colliers.com

Thailand Surachet Kongcheep Senior Manager | Research email surachet.kongcheep@colliers.com

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