The prices of older condominiums do not move upwards at the same rate as newly-launched projects, and in some cases they have not moved at all, according to CBRE’s special report Will Prices Rise in Bangkok’s Old Condominium Buildings?
In many developed markets it is possible to value a property per sqm by location, but in Bangkok this is not the case. A purchaser looking at any location in the Thai capital will still see a huge difference in prices per sqm between new, off-plan sales with asking prices at older properties.
A good example is in Bangkok’s Sukhumvit Soi 24, one of the most popular condominium locations in Bangkok, where we can see a huge range of prices.
Pornpimol Phuengkhuankhan, Director of Residential Sales Services at CBRE Thailand, said: “The oldest condominium on the street is Grand Ville House I, completed in 1981, where the current asking resale price is THB60,000 per sqm.
“The development with the most number of units is The President Park (351 units), which was completed in 1994; its four towers have a current asking resale price of THB60,000 per sqm.
“The most recently launched project on the street is Park 24, launched in Q4 2013, where the current average asking price for units for sale by the developer is THB210,000 per sqm.”
More than 29,000 condominium units were completed in downtown Bangkok after 1989 up until the Asian Financial Crisis in 1997. Many of these buildings were badly designed in terms of layout and specification. Improving these buildings has been difficult. Communal decision-making by condominium co-owners has proved challenging, with many examples of disputes between groups of co-owners.
A number of buildings completed in the second condominium cycle, starting in 2002, have fared better.
Pornpimol added that prices at Athenee Residence on Witthayu Road (completed in 2008) and The Park Chidlom on Chidlom road (completed in 2007) have, in many cases, doubled to more than THB200,000 per sqm from the average launch prices of around THB100,000 per sqm in 2004.
These prices are still below the achievable price for a similar-sized project with similar specifications launched off-plan today in a similar location.
To cite one example, the initial asking price of Nimit Langsuan, launched off-plan in Q1 2015, was THB300,000 per sqm.
The low price for projects completed before 1997 could be blamed on poor design, specification and maintenance, but for projects completed since 2002 the reason for prices not growing as fast as new off-plan sale prices is simply age and that buyers, especially Thais, prefer new buildings.
There are a number of factors that affect condominium prices, including land availability in city centre, possibility for redevelopment sales and expatriate residential rental market that rising rents may push up resale prices of completed units.
According to James Pitchon, Executive Director – Head of CBRE Research in Thailand, development sites have become more limited in the most popular condominium locations, resulting in less new supply in the areas. This may be good news for city-centre older buildings as it means less competition from new supply and high potential for price rise due to limited supply.
Also, the balance between land prices and construction costs is changing. For the first time in central Bangkok, land price as a percentage of the total development cost on a sellable square metre basis now exceeds the construction cost element. In some cases, land prices have increased from 25 percent to 60 percent of the total development costs.
CBRE expects land prices will continue to increase, and therefore in the future the value of some buildings could be greater if they were demolished and the land sold for redevelopment. However, the Thai Condominium Act requires 100 percent agreement of all co-owners to dissolve a condominium.
This means the market is unlikely to see purchasers speculatively buying units in old buildings in the hope that an agreement can be reached to sell to a developer.
Another factor that may affect resale prices of completed condominium buildings is the expatriate residential rental market. Currently only some older condominiums can successfully attract tenants. The main reason for this is the overall image of the buildings and the poor state of decoration of the units’ interiors.
To maintain rental rates and the potential for an increase in resale price, owners of old condominiums need to renovate the interior of their units, and co-owners agree to spend considerable sums on common area improvements to make sure their building is well-maintained or in good condition.
CBRE believes there will be an increase in the popularity of older buildings as the price gap between old and new widens, but it will only be in a few attractive buildings that are capable of sufficient refurbishment to a level where the cheaper price will overcome Thai buyers’ distaste for old buildings.
Source: http://www.cbre.co.th/en/News/Article/Will-Prices-Rise-in-Old-Bangkoks-Condominium-Buildings
