Construction Boom On Sukhumvit Road

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CONDOMINIUM

Construction boom on Sukhumvit Road

By Somluck Srimalee

The Nation

Growing demand also brings about high competition

The route from the Phloenchit intersection to Sukhumvit Soi 55 or Thonglor is seeing high competition among property developers as they launch condominium projects worth more than Bt100 billion, with more than 10,000 units.

Since last year nearly 100 projects have been launched in the area by both listed and non-listed property firms. Construction will be complete between the end of this year and 2013, according to a survey by The Nation last week.

Examples are The Clover Thonglor, Le Lux & Sky Walk condominium, Ivy Thonglor, The Trendy Condominium, Noble Phloenchit, Ideo Morph 38, and Aequa.

Condominiums along this route are priced between Bt80,000 and Bt200,000 per square metre.

Luxury residences priced over Bt150,000 per square metre are located between the Phloenchit intersection and the top of Sukhumvit Road between Sois 1 and 10. From Soi 10 to Soi 55, prices range between Bt80,000 and Bt150,000 per square metre.

One-bedroom units with utilisation space of 45-60 square metres are popular in this location.

Noble Development president Thongchai Busrapan said that after bookings for Noble Ploenchit opened from June 19-22, the company achieved presales worth Bt7.2 billion, or half of the total project value of Bt14 billion.

"Although this location has |high competition, our project is freehold, which is difficult to find |in this area, where most projects are for long-leasehold contracts," he said.

Demand in this location is sufficient to absorb the high number of condominium launches, according to a survey by the Real Estate Information Centre.

Growing demand in this area from both local and foreign buyers who live in Bangkok has driven condominium prices 10-20 per cent higher than their presale prices, depending on how close they are to Skytrain.

For example, Ficus Lane on Sukhumvit 44/1, which was priced at Bt50,000 per square metre when introduced in 2005, now sells for Bt110,000 per square metre.

Condominiums on Soi Thonglor that recorded presale prices of about Bt100,000 per square metre now go for more than Bt120,000 per square metre.

Condominiums at Soi Ruamrudee priced at Bt40,000 per square metre five years ago now record sales at Bt120,000 per square metre.

-- The Nation 2011-06-27

[Bengt]

Oh.....isnt it enough properties for sale already?

As I see it, For a few years now it seems less customers and i many cases the prices seems to go at a lower direction.

Just wonder why so high interest to invest in all theese projects..will it be a bubble by the time maybe?

[quiksilva]

The evergreen answer to your complaint/question is as follows: when people stop buying condos, developers will stop building them.

[theoldgit]

And from what I have seen the traffic congestion is increasing almost on a daily basis, especially in the sois off Sukhumvit.

[theoldgit]

The evergreen answer to your complaint/question is as follows: when people stop buying condos, developers will stop building them.

I'm sure the developers know what they are doing, but there seem to be loads of empty units.

[ratcatcher]

One only has to take a look at Thai Visa classifieds with hundreds of condos for rent or sale.

However as one previous poster correctly stated, when the demand ceases so will the builders. But it does seem as though there are many empty units in Bangkok and in Pattaya.

Fortunately I don't need to live in Bangkok.

[HeavyDrinker]

Would that be the same Trendy Condo where Ambassador Plaza used to be which has been empty since it was finished?

...along with the desolate development further down the soi, not to mention the new hotel where Clinton Plaza was which is still empty...

Whoever wrote this article certainly didn't actually go and have a look...

[Bkkorupcountry]

Would that be the same Trendy Condo where Ambassador Plaza used to be which has been empty since it was finished?

...along with the desolate development further down the soi, not to mention the new hotel where Clinton Plaza was which is still empty...

Whoever wrote this article certainly didn't actually go and have a look...

I don't read anywhere that the author claimed high occupancy - so what would having a look have to do with the article?

Empty units do not necessarily equate to unsold units. There are lots of investors, both local Thais and foreigners living overseas, who can afford to buy an apartment and not necessarily have it rented out immediately.

[givenall]

Oh.....isnt it enough properties for sale already?

As I see it, For a few years now it seems less customers and i many cases the prices seems to go at a lower direction.

Just wonder why so high interest to invest in all theese projects..will it be a bubble by the time maybe?

yeap

Boom before bust

[HeavyDrinker]

From the original article:

Demand in this location is sufficient to absorb the high number of condominium launches, according to a survey by the Real Estate Information Centre.

Growing demand in this area from both local and foreign buyers who live in Bangkok has driven condominium prices 10-20 per cent higher than their presale prices, depending on how close they are to Skytrain.

Bkkorupcountry wrote:

I don't read anywhere that the author claimed high occupancy - so what would having a look have to do with the article?

I'd say the first quote would be suggestive of trying to claim demand is high wouldn't you?

Empty units do not necessarily equate to unsold units. There are lots of investors, both local Thais and foreigners living overseas, who can afford to buy an apartment and not necessarily have it rented out immediately.

The overall timbre of the article seems to be suggestive that something of a property boom is happening in that area whereas a 5 minute walk around Soi 13 would have shown him a lot of empty units.

Even in your ridiculous statement above, I somehow doubt that all these are owned by absentee owners...do you?

Do you just make it up as you go along?

Edited June 27, 2011 by HeavyDrinker

[Bkkorupcountry]

From the original article:

Demand in this location is sufficient to absorb the high number of condominium launches, according to a survey by the Real Estate Information Centre.

Growing demand in this area from both local and foreign buyers who live in Bangkok has driven condominium prices 10-20 per cent higher than their presale prices, depending on how close they are to Skytrain.

Bkkorupcountry wrote:

I don't read anywhere that the author claimed high occupancy - so what would having a look have to do with the article?

I'd say the first quote would be suggestive of trying to claim demand is high wouldn't you?

Yes, the first quote does indeed claim that demand is high. Don't mean to nitpick but that statement is according to a survey by the REIC and not the words of the author.

[HeavyDrinker]

Don't mean to nitpick but that statement is according to a survey by the REIC and not the words of the author.

That is my point exactly.

This reads like an advert or a piece of propaganda.

"Surveys" conducted internally within an industry are notoriously poor factual sources...but then they are hardly going to tell the truth about the property market in BKK (which one would assume is as grim as it is in the rest of the word) and admit to huge over development. That tends to upest their investors...

It's a bit like the banks telling us how healthy banking is now....

However had the author wished to produce a nice interesting article he should have looked for himself and he could have countered their findings with the reality of the area.

[Bkkorupcountry]

Don't mean to nitpick but that statement is according to a survey by the REIC and not the words of the author.

That is my point exactly.

This reads like an advert or a piece of propaganda.

"Surveys" conducted internally within an industry are notoriously poor factual sources...but then they are hardly going to tell the truth about the property market in BKK (which one would assume is as grim as it is in the rest of the word) and admit to huge over development. That tends to upest their investors...

It's a bit like the banks telling us how healthy banking is now....

However had the author wished to produce a nice interesting article he should have looked for himself and he could have countered their findings with the reality of the area.

Point taken. I can however tell you that the situation is similar in many other Asian countries. Property prices are still going up due to strong demand, in spite of many empty units. I believe there is a simple explanation. Buyers still believe that property will nett a better return in the long run with less risk, as compared to equities. Furthermore, buyers are cash rich (unlike in the UK and in the States), not as highly leveraged and therefore boom and bust is not as big a threat in Asia as in some western economies.

[themockrat]

Whoever is responsible for the land planning in Sukhumvit must be a complete idiot. Now you've got skyscraper condominiums in every tiny little Soi where barely 1 car can pass one 1-lane traffic, forget about 2 cars and 2-lane traffic. Every condominium has thousands of residents with hundreds or thousands of cars. It will be a nightmare in the coming years.

[theoldgit]

Whoever is responsible for the land planning in Sukhumvit must be a complete idiot. Now you've got skyscraper condominiums in every tiny little Soi where barely 1 car can pass one 1-lane traffic, forget about 2 cars and 2-lane traffic. Every condominium has thousands of residents with hundreds or thousands of cars. It will be a nightmare in the coming years.

From someone who lives on Soi 49 I can assure you it's becoming a nightmare already, and I shudder everytime I pass a new development, that seem to spring up almost daily.

[bristolgeoff]

they may change the name to apartment soi soon.that is all that is going up along the soi

[TheGhostWithin]

I don't know how cash rich they are - most Asian countries have a few holding the majority of the money. China has an average income of $5000USd per capita per annum. Not exactly cash rich. More likely, a few wealthy groups lending money on very long loans (you know, the less you pay on a deposit means a higher accumulation of interest of the period of the loan), which was also part of the reason of the collapse in the US housing market. The Shanghai, Beijing and Hong Kong markets are now on the same way, with most of the original owners now sold out (I have friends that sold all their property in China).

The new government rules in China to halt price inflation on housing sales is something that Thailand should consider, but won't because it is a source of positive income flow into the Kingdom - they will then complain in 5 years when even their top tier managers cannot afford to get even a mortgage on any of these apartments on Sukhumvit.. or they will just have a crack down on Foreigners owning and renting properties in Thailand, putting pressure towards a bear market in the condo sector.

Most Thai people driving their brand new Suzuki Swifts etc, did not pay cash for them - they have them on 20-30 year loans. Just creative accounting, in a society which is from what I have seen just as over-leveraged as Hong Kong or Shanghai.

Edited June 27, 2011 by TheGhostWithin

[Bkkorupcountry]

I don't know how cash rich they are - most Asian countries have a few holding the majority of the money. China has an average income of $5000USd per capita per annum. Not exactly cash rich. More likely, a few wealthy groups lending money on very long loans (you know, the less you pay on a deposit means a higher accumulation of interest of the period of the loan, which was also part of the reason of the collapse in the US housing market. The Shanghai, Beijing and Hong Kong markets are now on the same way, with most fo the original owners now sold out (I have friends that sold all their property in China) and the new government rules in China to haltprice inflation on housing sales is something that Thailand should consider, but won't because it is a source of positive income flow into the Kingdom - they will then complain in 5 years when even their top tier managers cannot afford to get even a mortgage on any of these apartments on Sukhumvit.. or they will just have a crack down on Foreigners owning and renting properties in Thailand, putting pressure towards a bear market in the condo sector.

Most Thai people driving their brand new Sizuki Swifts etc, did not pay cash for them - they have them on 20-30 year loans. Just creative accounting, in a society which is from what I have seen just as over-leveraged as Hong Kong or Shanghai.

Don't quite agree as Asia is not only China. Countries like Malaysia, Singapore, Thailand and to a lesser extent, Indonesia have a large middle class (but please, let's not get into having to quote figures and all. We can just easily see that all around us). In Malaysia for eg, the maximum margin of financing is 90% but in most cases, the banks will only loan 70-80%. Bear in mind also that in many instances, the parents help out with the deposits. Thus, leverage is no where near as high as in the UK or US.

I guess that your friends that sold all their properties in China are basically taking profit while they can, in case the market crashes. There was a podcast on Money Talk with David Kuo not so long ago where the guest speaker made a very compelling case as to why boom and bust is unlikely in Asia including China, for pretty much the same reasons that I have mentioned above.

The main reason for the collapse of the US housing market is because the (criminal) banks lent money to people WHO COULD NOT AFFORD TO REPAY. In Asia, I don't believe that any house buyer would take a loan from a loan shark (I presume this is whom you mean by "a few wealthy groups lending money on very long loans") except maybe some poor rural folk (but that won't have any impact on property prices). Thus all mortgage loans will be through banks and licensed finance companies which vets the applicants thoroughly - which is why there was no housing collapse in Asia.

Interesting point you made about Thais taking out 20-30 year loans on cars - can you point me in the direction of some of these lenders? Considering that a car is normally expected to last 10-15 years, I reckon I can make a good living doing consultancy work for them on the Finance 101.

[GreenSnapper]

Most new condos are empty.

I see many condos which are built in the last years, occupied at most at 20%.

There are lots of Thais with money who invest like crazy. They are told by agents condo prizes go up every year 10-15% and you can also rent out for 8% per year.

As the rich are not much better educated than a rice farmer, they believe this crap and let the bubble grow.

Crazy prices for crappy apartments. And after 5 years, they will look like slums. Recently saw a new luxury condo at prime location where the pool was unusable due to negligence for already 6 months.

Never buy a condo here - you will lose big $$.

[TheGhostWithin]

I don't know how cash rich they are - most Asian countries have a few holding the majority of the money. China has an average income of $5000USd per capita per annum. Not exactly cash rich. More likely, a few wealthy groups lending money on very long loans (you know, the less you pay on a deposit means a higher accumulation of interest of the period of the loan, which was also part of the reason of the collapse in the US housing market. The Shanghai, Beijing and Hong Kong markets are now on the same way, with most fo the original owners now sold out (I have friends that sold all their property in China) and the new government rules in China to haltprice inflation on housing sales is something that Thailand should consider, but won't because it is a source of positive income flow into the Kingdom - they will then complain in 5 years when even their top tier managers cannot afford to get even a mortgage on any of these apartments on Sukhumvit.. or they will just have a crack down on Foreigners owning and renting properties in Thailand, putting pressure towards a bear market in the condo sector.

Most Thai people driving their brand new Sizuki Swifts etc, did not pay cash for them - they have them on 20-30 year loans. Just creative accounting, in a society which is from what I have seen just as over-leveraged as Hong Kong or Shanghai.

Don't quite agree as Asia is not only China. Countries like Malaysia, Singapore, Thailand and to a lesser extent, Indonesia have a large middle class (but please, let's not get into having to quote figures and all. We can just easily see that all around us). In Malaysia for eg, the maximum margin of financing is 90% but in most cases, the banks will only loan 70-80%. Bear in mind also that in many instances, the parents help out with the deposits. Thus, leverage is no where near as high as in the UK or US.

I guess that your friends that sold all their properties in China are basically taking profit while they can, in case the market crashes. There was a podcast on Money Talk with David Kuo not so long ago where the guest speaker made a very compelling case as to why boom and bust is unlikely in Asia including China, for pretty much the same reasons that I have mentioned above.

The main reason for the collapse of the US housing market is because the (criminal) banks lent money to people WHO COULD NOT AFFORD TO REPAY. In Asia, I don't believe that any house buyer would take a loan from a loan shark (I presume this is whom you mean by "a few wealthy groups lending money on very long loans") except maybe some poor rural folk (but that won't have any impact on property prices). Thus all mortgage loans will be through banks and licensed finance companies which vets the applicants thoroughly - which is why there was no housing collapse in Asia.

Interesting point you made about Thais taking out 20-30 year loans on cars - can you point me in the direction of some of these lenders? Considering that a car is normally expected to last 10-15 years, I reckon I can make a good living doing consultancy work for them on the Finance 101.

Thanks for the response - I did not realise that banks in TH only loan up to 80-90% of the value of the property. This of course is a good thing.

In regards to the companies doing long term loans on vehicles, I will need to check with my partner once she is home, as it is her friends that dabble in this type of thing. For me, in a country whereby I feel I am walking on a carpet which could be pulled from under me at any time depending on who decides to target you today, I deal mostly in cash - or with banks at home in New Zealand (I travel between the two countries at various times of the year).

You are correct that they could not afford to pay, which lead to sub-prime defaults. The reason they could not afford to repay, was the rise of unemployment, which lead to an increase of defaults. The saturation of foreclosed properties has lead to a 40+% drop in prices in many areas, with inventories which will take years to clear. In this case, it is vacancies which may well take years to fill, unless you are willing to compremise and rent at a lower than market value price (assuming the comments on empty condos are true).This in itself, where market supply substantially outstrips demand, is an indicator of a bubble - no matter what the real estate body says. I am addicted to Bloomberg, so unfortunately only have access to what Americans see as important - USA, China, and Europe. I do wish there was more data on Thailand than constant reporting of Red shirt protests and the US$205,000,000 net outflow last week alone.

Googling "Thailand SET election" reveals a large number of websites explainign a decline in properties, and stocks, for a number of reasons - mostly due to political instability. Bubbles are not always formed as a direct result of market saturation. Watch would would happen if gpvernments started charging people tax on gold purchases

I really would love an apartment in Sukhumvit.. but apartments there cost the same price as here in NZ - and do not meet the same building standards, though have to admit they are nicer in terms of faciltiies.

[SantiSuk]

........ The main reason for the collapse of the US housing market is because the (criminal) banks lent money to people WHO COULD NOT AFFORD TO REPAY ......

That's a cop out. I blame greedy avaricious borrowers as much as the banks. This generation needs to accept responsibility for reckless behaviour, not hunt around for scapegoats.

[No I'm not a banker - I hate banks]

[Khun Jean]

Sometimes building the building is enough to make money for certain groups. And if you can sell units from fancy brochures even better. Works great when economy is growing, just make sure you move money out of the country when the bubble bursts.

[Bkkorupcountry]

........ The main reason for the collapse of the US housing market is because the (criminal) banks lent money to people WHO COULD NOT AFFORD TO REPAY ......

That's a cop out. I blame greedy avaricious borrowers as much as the banks. This generation needs to accept responsibility for reckless behaviour, not hunt around for scapegoats.

[No I'm not a banker - I hate banks]

Not quite sure what you mean by cop out. It is universally accepted that the subprime trailer park mortgages were the root cause of the subsequent crisis.

[jackdawson]

Never buy a condo here - you will lose big $.

god , i wish i had said that

[HeavyDrinker]

They just make it up as they go along!

[SiamRose]

Many people are buying property because interest rates are so low they see no point leaving their money in the bank. So there is demand for all this new property even though most of it is empty. It is a global trend and it is primarily driven by the same force everywhere - low interest rates.

[theoldgit]

So there is demand for all this new property even though most of it is empty. It is a global trend and it is primarily driven by the same force everywhere - low interest rates.

Not sure how widespread your global trend is, in the UK, which also has a low interest rate, property prices are being reduced, maybe to a more realistic price, I don't know. The growing market is in rental properties, where there is an upward trend in rental prices.

What I don't understand is why Thai investors prefer to leave properties empty rather than accept a realistic rent, surely some income would add value to their investment.

[SiamRose]

Not sure how widespread your global trend is, in the UK, which also has a low interest rate, property prices are being reduced

I see this happening in Thailand, HK, China, Malaysia, Australia and Canada. In some other markets like the UK and the US banks went crazy over the lats few years lending 100% or more of property value and lending money to anyone who asked so in those markets the property bubble grew much more quickly and is now deflating. In other markets, especially Asia, banks were more cautious and the property bubbles have grown more slowly and are still inflating.

why Thai investors prefer to leave properties empty rather than accept a realistic rent, surely some income would add value to their investment

I think its a combination of things; buying property and leaving it as a bare shell saves on the fitting out cost and makes more sense if you plan to flip the unit. The future buyer may not like your interior design. For every $ spent fitting out an apartment you probably only get 50cents back when you sell. You may be able to buy 4 units as bare shell compared to 3 units fully decorated. Also leasing out property is a hassle, finding the tenants, collecting the rent, doing maintenance, etc. Then when it comes time to sell an empty unit may be easier to sell. It depends on the buyer of course, an investor looking for yield will be happy with a tenant, but someone who plans to live there will prefer an empty place they can decorate the way they like.

[GreenSnapper]

Many people are buying property because interest rates are so low they see no point leaving their money in the bank. So there is demand for all this new property even though most of it is empty. It is a global trend and it is primarily driven by the same force everywhere - low interest rates.

A low interest rate is better than losing your capital.

The calculation, agents tell their clueless customers, goes like that:

You buy an overpriced condo for x millions Baht. This condo will rise in value approx 10-15% per year.

Additionally you can rent out that condo for 8% per year of the price you paid.

Reality is: After 5 years, the condo is worthless and cannot be sold at all for a reasonable price. Renting out that condo is also extremely difficult as your calculated rent, based on what you paid, would be in the range 40-80000 Baht/pm. Few Thais will rent for that, they prefer to buy. And very few Farangs have the money to rent in that price range.

Result: These "luxury" condos decay more and more, unoccupied. Then comes the "face-loss" factor, where Thai owners don't go down with price/rent, because "I paid so much, I need to recover my investment". More loss.

Any 0.6% Kasikorn savings account is a better investment than buying a condo.

[Thai-Spy]

In neighborhoods just off Sukhumvit one can already see hand-written "for sale" signs as people try to flip units in nearby buildings which aren't yet completed.