High Condo Prices Deter Hua Hin Buyers

[george]

High condo prices starting to deter Hua Hin buyers

Many developers' expectations too high

HUA HIN: -- Condominium prices in this popular beach resort have climbed substantially, a factor that is starting to deter potential buyers, according to Jens Brochner Nielsen, chief executive officer of D2 Real Estate Co.

Prices peaked a while ago and this means those buying units today will not obtain the profits enjoyed by those who bought one or two years ago. One example is a 70-square-metre unit that D2 Real Estate initially sold for 1.7 million baht and year later resold for 2.8 million. Two months ago the same condominium changed hands at 3.6 million baht.

While demand for good property is still strong, Mr Nielsen says supply is thinning, with few new condominium resort developments and a limited number of owners willing to resell their units. This has pushed up prices and kept some interested buyers away.

"There are very few units in the market today and it is a high-price market."

European buyers know they cannot buy single houses unless they are married to Thais, and for this reason they are keener on acquiring condominiums but higher prices are a deterrent.

Pattaya too has become more pricey in the last three years with studios that were sold at 600,000 to 700,000 baht now costing 1.2 million to 1.3 million. However, Mr Nielsen observed that unlike Hua Hin, Pattaya had a larger supply of new property, but not necessarily of good deals.

"It's not value for money in the Pattaya market. There are some cheap units but very badly maintained ... so it's difficult but still possible to find value-for-money property there."

In Hua Hin's landed property market, activity has fallen off though one can still find reasonably cheap real estate.

"I don't mean the market is in a crisis but that it is not so good for the developer," he said. "Many local people have seen developers make very good money so everybody wants to become a developer. Everybody is trying to find land but prices are up. This is all controlled by small local developers ... who all dream of becoming millionaires very fast."

Seaside sites are scarce and price pressure is rising. He cites the example of a parcel of land and a 120-square-metre house, which two to three years ago cost just one million baht and today is being sold for two million.

Many of the prospective foreign buyers are not as rich as some developers may think. A lot of foreigners with Thai spouses in Hua Hin would be comfortable buying houses at around one million baht, but not 2-4 million.

Good deals are still available if one moves a bit farther out, for example from Jomtien to Ban Chang and Rayong, or from Hua Hin to Pranburi.

However, even these markets are not as good as they were two years ago and once property at existing sites has gone, buyers would have to turn to new developments that would cost much more.

Mr Nielsen advises buyers to look at second-hand market because quality of life within the development is more important than newness. If the unit is to be your home then it has to be comfortable and the design good. "Often you get better value for money in the second-hand condominium market than brand new, and you will be happier in the end."

For the 3.3 million baht one would pay for a 54-square-metre new condo, one could get a 70-square-metre unit in the secondary market, including an extra bedroom that could be turned into an office. "The extra room in my opinion has much higher value than something new."

Mr Nielsen has some units to sell at the Cha-am Grand Condotel This 11-year-old development has two swimming pools, a cinema, snooker, fitness centre, sauna, Jacuzzi and a restaurant. D2 Real Estate sold one 180-square-metre unit that it completely refurbished to match expatriate tastes for 7.5 million baht last year. A similar unit was sold last December for 7.9 million and a third one is currently on the market for 8.5 million baht.

Turning to the Bangkok market, where D2 focuses mainly on riverfront properties, Mr Nielsen believes some of the new condos are overpriced. "Developers are trying to get too big a profit for themselves. It is not acceptable that there is 40% margin in new developments, it's too much."

These developers, he said, could be out of the market in five years if they do not drop their profit margin to 20% from the 35-50% they are trying to obtain today.

He pointed to one central business district condo that was completed 10 years ago but still has units for sale. If the developer had worked in a 20% margin from the beginning there would no units left unsold, but some are now charging a very high price per square metre to cover the interest burden on unsold units.

However, despite this Mr Nielsen does not see many price cuts on the horizon because today's market is not totally unrealistic, just a bit overpriced.

Some areas of the capital, such as Rama III Road where prices are still reasonable, will see a rise but in other areas there will not be an escalation.

Mr Nielsen believes the Bangkok condo market works well in the 4-5 million baht range, with anything higher being difficult to move. This is also a very good market for family apartments priced below four million baht but there are not many good units for sale in this range.

Also two-bedroom units of 70 to 80 square metres and costing less than 2.5 million baht sell very fast.

Mr Nielsen is perplexed, though, by the rush to develop so many studio units. "Is this a mistake in the market? I don't know, because our feeling is that studios are difficult to sell."

--Bangkok Post 2006-05-22

[PeaceBlondie]

Interesting point of view from one man in the business. I don't know; I don't buy real estate. I notice that the new mall currently has many booths selling real estate, both condos and separate houses.

[RAZZELL]

High condo prices starting to deter Hua Hin buyers

Many developers' expectations too high

HUA HIN: -- Condominium prices in this popular beach resort have climbed substantially, a factor that is starting to deter potential buyers, according to Jens Brochner Nielsen, chief executive officer of D2 Real Estate Co.

Prices peaked a while ago and this means those buying units today will not obtain the profits enjoyed by those who bought one or two years ago. One example is a 70-square-metre unit that D2 Real Estate initially sold for 1.7 million baht and year later resold for 2.8 million. Two months ago the same condominium changed hands at 3.6 million baht.

While demand for good property is still strong, Mr Nielsen says supply is thinning, with few new condominium resort developments and a limited number of owners willing to resell their units. This has pushed up prices and kept some interested buyers away.

"There are very few units in the market today and it is a high-price market."

European buyers know they cannot buy single houses unless they are married to Thais, and for this reason they are keener on acquiring condominiums but higher prices are a deterrent.

Pattaya too has become more pricey in the last three years with studios that were sold at 600,000 to 700,000 baht now costing 1.2 million to 1.3 million. However, Mr Nielsen observed that unlike Hua Hin, Pattaya had a larger supply of new property, but not necessarily of good deals.

"It's not value for money in the Pattaya market. There are some cheap units but very badly maintained ... so it's difficult but still possible to find value-for-money property there."

In Hua Hin's landed property market, activity has fallen off though one can still find reasonably cheap real estate.

"I don't mean the market is in a crisis but that it is not so good for the developer," he said. "Many local people have seen developers make very good money so everybody wants to become a developer. Everybody is trying to find land but prices are up. This is all controlled by small local developers ... who all dream of becoming millionaires very fast."

Seaside sites are scarce and price pressure is rising. He cites the example of a parcel of land and a 120-square-metre house, which two to three years ago cost just one million baht and today is being sold for two million.

Many of the prospective foreign buyers are not as rich as some developers may think. A lot of foreigners with Thai spouses in Hua Hin would be comfortable buying houses at around one million baht, but not 2-4 million.

Good deals are still available if one moves a bit farther out, for example from Jomtien to Ban Chang and Rayong, or from Hua Hin to Pranburi.

However, even these markets are not as good as they were two years ago and once property at existing sites has gone, buyers would have to turn to new developments that would cost much more.

Mr Nielsen advises buyers to look at second-hand market because quality of life within the development is more important than newness. If the unit is to be your home then it has to be comfortable and the design good. "Often you get better value for money in the second-hand condominium market than brand new, and you will be happier in the end."

For the 3.3 million baht one would pay for a 54-square-metre new condo, one could get a 70-square-metre unit in the secondary market, including an extra bedroom that could be turned into an office. "The extra room in my opinion has much higher value than something new."

Mr Nielsen has some units to sell at the Cha-am Grand Condotel This 11-year-old development has two swimming pools, a cinema, snooker, fitness centre, sauna, Jacuzzi and a restaurant. D2 Real Estate sold one 180-square-metre unit that it completely refurbished to match expatriate tastes for 7.5 million baht last year. A similar unit was sold last December for 7.9 million and a third one is currently on the market for 8.5 million baht.

Turning to the Bangkok market, where D2 focuses mainly on riverfront properties, Mr Nielsen believes some of the new condos are overpriced. "Developers are trying to get too big a profit for themselves. It is not acceptable that there is 40% margin in new developments, it's too much."

These developers, he said, could be out of the market in five years if they do not drop their profit margin to 20% from the 35-50% they are trying to obtain today.

He pointed to one central business district condo that was completed 10 years ago but still has units for sale. If the developer had worked in a 20% margin from the beginning there would no units left unsold, but some are now charging a very high price per square metre to cover the interest burden on unsold units.

However, despite this Mr Nielsen does not see many price cuts on the horizon because today's market is not totally unrealistic, just a bit overpriced.

Some areas of the capital, such as Rama III Road where prices are still reasonable, will see a rise but in other areas there will not be an escalation.

Mr Nielsen believes the Bangkok condo market works well in the 4-5 million baht range, with anything higher being difficult to move. This is also a very good market for family apartments priced below four million baht but there are not many good units for sale in this range.

Also two-bedroom units of 70 to 80 square metres and costing less than 2.5 million baht sell very fast.

Mr Nielsen is perplexed, though, by the rush to develop so many studio units. "Is this a mistake in the market? I don't know, because our feeling is that studios are difficult to sell."

--Bangkok Post 2006-05-22

A link to D2???