Caution Amid The Bangkok Condo Boom

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Caution amid the condo boom

PROPERTY: By the time units are finished, market conditions could be very different

BANGKOK: The recent stampede to buy condominium units in the centre of Bangkok has an underlying danger, cautions Nigel Cornick, chief executive officer of Raimon Land.

The chief concern centres on the long time from conception to completion of condo projects. If prices should drop by, say, 25% before the projects are completed in two to three years, people might decide against taking transfer of their units, says Mr Cornick.

The environment in the next two to three years is still an unknown factor, but if every project now being promoted goes ahead, there could be an oversupply, notably in certain parts of the central business district, he said.

Developers and consumers alike experienced the phenomenon less than a decade ago, so all sides are keeping their fingers crossed at the moment.

Raimon Land is among the companies with a lot at stake. It recently sold all of the units at The Lakes near the Asok intersection within days of its launch. It is also a partner with Kudu in The Lofts, an upscale townhouse project. As well, it if preparing to launch two projects in December, one with its partner and the other on its own.

The luxury condo market is seeing a new wave of projects coming onstream that will not be completed for 24, 36 or even 48 months. This will lead to a slowdown in off-plan sales as buyers become more selective with more choices available, Mr Cornick said.

``In the last 12 months, because there has been very little available, people have tended to make their decisions to buy very quickly,'' he said.

Mr Cornick hopes that the prospect of a gathering bubble will prompt banks and financiers to be more cautious about the developers to whom they lend. Government policymakers in recent days have suggested, for example, that loans to purchase land should be denied.

Raimon Land has taken steps to ensure that it will be able to ride out any future problems by focusing on good locations, with proximity to the skytrain or major roads, unlike some other projects now in the planning stages, he said.

Competitive pricing also ensures the success of a project, he said.

``I think that in the CBD market there is definitely a lot of supply, muted supply. It's all coming onstream which ultimately will have an impact on the demand and supply equation, which before was out of equilibrium as it was definitely demand-driven. There wasn't supply available but that is about to change,'' Mr Cornick said.

``Over the last 12 months developers have strongly driven up prices and those launching the new batch of projects hope to be equally successful. I cannot believe there is too much upside in prices for a lot of projects.''

However, a land shortage in prime locations will protect prices to some extent and may even boost them further because Bangkok's traffic is now at the stage it was a few years ago and is getting worse. Therefore, people are looking to live closer to the city centre and mass-transit stations, he said.

``So land in good locations will hold its value and become more expensive which ultimately will be passed back into pricing,'' Mr Cornick said.

The addition of more units in the heart of the city means the secondary market will be strongly hit with older condos and older apartments feeling the pinch and having to slash rents to stay competitive.

``You will definitely see more older units available for rent and more older condominiums for sale,'' he said.

Together with Kudu, Raimon Land will soon launch The Lofts Yen Akat condominium consisting of 65 units and designed by Kerry Hill, the designer of the Sukhothai Hotel. Units of one to three bedrooms will be priced from 65,000 baht a square metre. Unit sizes range from 72 to 300 square metres.

The second project, which Raimon will develop on its own, is a The Legend, a 14-storey residential condominium on Soi Saladaeng. The units will have from one to three bedrooms with prices starting at 70,000 baht a square metre.

``The majority of the units are from 70 to 135 square metres which is where we think the market is,'' Mr Cornick said, adding the site was originally designed as an apartment building and piling and some basement structures are already in place.

``It means we can get on the site quickly and can finish it in 14 to 16 months.''

--Bangkok Post 2003-11-24