Prices For Top-End Condos In Thailand To Keep Rising

[webfact]

Prices for top-end condos to keep rising

By The Nation

Real-estate firm points to increased land, construction, labour costs

Real-estate services firm Jones Lang LaSalle believes that prices for top-end condominium units in Bangkok will rise further, despite strong competition.

This is because developers are well capitalised and remain confident that rising development costs and product quality justify the higher prices.

Although foreign interest has been rising since the outcome of the July elections, the global economic outlook remains shaky, so Thai buyers continue to be the main source of demand, lured by rental income, low interest rates and the desire to purchase property as a hedge against inflation.

Jones Lang LaSalle's managing director Suphin Mechuchep said that although top-end condominiums were only a small segment of the market and were not necessarily representative of the Bangkok condominium market as a whole, the company had discovered some interesting movements in this sector.

Generally, the sector has continued to perform fairly well. Although demand from foreign buyers has not yet fully recovered, interest from this group has picked up since the elections in July. Thai buyers remain active, with most of the recent purchases being made by high-net-worth Thais who are buying for their own occupation or as an investment, she said.

Jones Lang LaSalle said recently completed luxury developments were enjoying an average sales rate of about 85 per cent, while newly launched projects had a lower average sales rate of 50 per cent. This is still a relatively healthy rate, when high levels of new supply entering the market over recent years is taken into account.

Jones Lang LaSalle's data reveals that the number of top-end condominiums in completed buildings across Bangkok's central business district rose from 10,324 at the end of March 2006 to 21,464 at present. An additional 3,867 units are expected to be completed between now and the end of 2013.

The real-estate firm said top-end units in some completed condominium developments had enjoyed price increases of as much as 40 per cent over the past three years. Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year. Units in prime locations within the central business district where land for new developments is becoming scarce, such as Phloenchit, Wireless Road, Lang Suan, Sala Daeng and Sathorn, are fetching the highest prices.

While sustained demand provides room for price increases, higher development costs, mainly for land and construction, have been another major factor pushing up prices.

"With new commercial and residential developments having mushroomed over recent years, vacant land and sites for redevelopment in Bangkok's central business district have become increasingly scarce. In addition, most developers of top-end condominiums are aiming for the highest quality. All these things have contributed to the rise in condominium prices," Suphin said.

Many developers are expected to increase the prices of their residential units as a result of higher prices for construction materials and rising labour costs. Steel prices, which are up by 10 per cent since early this year, are having the greatest impact on condominium prices, relative to other residential developments. The prospective increases in the minimum wage will also have a direct impact on construction costs.

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

After the Bank of Thailand imposed mortgage limits earlier this year, condominium buyers are reportedly holding off on purchases until stimulus measures initiated by the new government take effect. Notable among these prospective policies is the provision of mortgages that are interest-free for the first three years for first-time home-buyers. However, these measures are unlikely to have any impact on the top-end condominium market.

"Most people who buy top-end condominiums are not first-time homebuyers. While the government has announced its intention to launch measures to help home-buyers, we expect that these measures will be aimed mainly at home-buyers in the middle to low-end segments," she said.

-- The Nation 2011-09-09

[loong]

Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year.

Am I the only one who thinks it obscene that many construction workers who work on these projects are paid less than 300 Baht per day?

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

[jeanelie]

Most of workers are illegals who must be happy when they get paid. Legal slavery.

[PattayaPhom]

Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year.

Am I the only one who thinks it obscene that many construction workers who work on these projects are paid less than 300 Baht per day?

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

But the cost of land...especially beachfront is very high, so the wage paid is fair, dont forget, those that work there are living onsite for free and normally receive food also, so their salary is all disposable income.

Edited September 9, 2011 by PattayaPhom

[johnnyk]

No mystery here. Thais, like most Asians, don't trust paper money. They see land, buildings and gold as better bets. Politicians print money to save their asses, they can't manufacture land or gold.

[Chopperboy]

Most of workers are illegals who must be happy when they get paid. Legal slavery.

Most have Immigrant ID, either the old one year pink card or the new passport 2 year scheme with work permit. Most won't work for less than 300B per day for a hard job like steel work or concrete, down to 200B for an easier job like painting.

But thats many times what they would get back home. Some also effectively run there own business and will do work on a price basis i.e. cement rendering for so much per square meter etc.

[guzzi850m2]

Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year.

Am I the only one who thinks it obscene that many construction workers who work on these projects are paid less than 300 Baht per day?

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

Check Dubai, Qatar & Singapore. The Indians and Pakistanis there works for peanuts, here its the Burmese. Its really sad but not much you & me can do about it. I sometimes work in the Middle East (oil off-shore industry), talked to my Indian driver, he goes home for 1 month (sometimes less) every 11-12 month. Wife and 3 kids stay home , not good.

[farang000999]

the mistake many investors are making is thinking that home prices are stable. they are thinking, well even if i can only rent for 3% a year that beats the money market interest rate, plus the property will increase in value next year. We saw how that worked out in the West.

What you really want to look at is the cost to the developers. if they are building these condos for relatively the same prices yoy, yet sales prices are climbing much faster, that is a bubble.

[GreenSnapper]

the mistake many investors are making is thinking that home prices are stable. they are thinking, well even if i can only rent for 3% a year that beats the money market interest rate, plus the property will increase in value next year. We saw how that worked out in the West.

What you really want to look at is the cost to the developers. if they are building these condos for relatively the same prices yoy, yet sales prices are climbing much faster, that is a bubble.

This is already a bubble.

Recently visited a newly finished top-end condo building in Aree area, not far from BTS, quite a nice location.

115m2 was supposed to be 15 Million Baht. Nothing special here, 3 BR, wooden floor of medium quality, small bathrooms, substandard pool/gym, crappy cheap kitchen. As so often, drainage in one bathroom was smelling of sh+t, "that's normal" the girl said.

Who in his right mind pays 500,000US$ for a cheap construction which will probably be run down in 10 year's time?

[Vorranuch]

Who in his right mind pays 500,000US$ for a cheap construction which will probably be run down in 10 year's time?

Because 1) locals do not think in US$ terms 2) they think it is a good location and Sathorn/Silom/Ploenchit are even more expensive.

That said it remains a mystery to me why they would not buy a 10 years old condo a few hundred meters away for less than half the price. One answer is that you get very generous financing for new projects, but still.

I totally agree that in 10 years time your 10 years old condo and then 20 years old condo will look the same. One overlooked issue is also maintenance cost inflation with all these facilities and dozens of staff. I suspect these costs will rise much faster than your condo's value and retal income if you are an investor.

[trogers]

I totally agree that in 10 years time your 10 years old condo and then 20 years old condo will look the same. One overlooked issue is also maintenance cost inflation with all these facilities and dozens of staff. I suspect these costs will rise much faster than your condo's value and retal income if you are an investor.

Whether inflation of maintenance cost will rise faster than value and rental income will depend on location and acquisition price. There are people who may think a location for a top-end unit is prime when it is not, or that its price is attractive when it is actually already inflated.

[craigt3365]

Most of workers are illegals who must be happy when they get paid. Legal slavery.

Most have Immigrant ID, either the old one year pink card or the new passport 2 year scheme with work permit. Most won't work for less than 300B per day for a hard job like steel work or concrete, down to 200B for an easier job like painting.

But thats many times what they would get back home. Some also effectively run there own business and will do work on a price basis i.e. cement rendering for so much per square meter etc.

Not really. I've been to several immigrant camps...er...slums. We hand out stuff to the kids at times. I rented a condo with a view of one for 3 months while our house was being renovated. Saw a police truck go in one day and saw them jumping over the walls to get away. Same thing happened here in our village during the construction. The police stopped by and there were running into the various lots near the boundary wall and jumping over it to get away. 100% illegal workers. Most don't even speak Thai....wifey had a hard time talking with our workers. I think our workers were getting around 200B per day...doing really hard work. Slavery for sure...and illegal.

[Jebhead]

Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year.

Am I the only one who thinks it obscene that many construction workers who work on these projects are paid less than 300 Baht per day?

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

Check Dubai, Qatar & Singapore. The Indians and Pakistanis there works for peanuts, here its the Burmese. Its really sad but not much you & me can do about it. I sometimes work in the Middle East (oil off-shore industry), talked to my Indian driver, he goes home for 1 month (sometimes less) every 11-12 month. Wife and 3 kids stay home , not good.

Not good but all relative, must be better than the situation in the home country where they have come from.....happens all over the world and will never be eliminated.

JH

[louse1953]

Certain newly launched projects are offering prices ranging from Bt90,000 to Bt230,000 per square metre, compared to a price range of Bt150,000 to Bt200,000 per square meter offered by comparable new projects launched last year.

Am I the only one who thinks it obscene that many construction workers who work on these projects are paid less than 300 Baht per day?

"With the government's plan to raise the minimum daily wage to Bt300, residential prices are likely to rise further, as development costs will inevitably increase. Some pundits forecast a 5- to 7-per-cent increase in the prices of new condominiums," Suphin said.

But the cost of land...especially beachfront is very high, so the wage paid is fair, dont forget, those that work there are living onsite for free and normally receive food also, so their salary is all disposable income.

What's the cost of land got to do with builders wages.Do they get a cut on the land price.