Condo Investment in Bangkok

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Despite recent political uncertainties, many buyers are looking for a condominium for personal use that can be later sold or rented out, resulting in healthy returns.

International property consultants, CB Richard Ellis advise that
purchasing a condominium could be one of the safest investments buys in the Thai market right now for foreigners in light of political and economic uncertainties falling interest rates, the downturn of the stock market, and the falling yields of government bonds.

Foreign purchasers wanting to own condominiums in Thailand are permitted to buy freehold condominium units, but the building must not exceed 49% of the foreign ownership ratio of the condominium and the purchase must be in cash.

According to the latest survey conducted by CBRE. The total stock of existing condominiums in Bangkok is 48,128 units as of the first quarter of 2007, an increase of 9.53% or 4188 units. In terms of area, 21.4% are in the Central Business District area. (Silom, Sathorn and Suan Plu Roads), 4.4% in Central Lumpini, (Wireless, Ploenchit, Langsuan and Rajdami Roads), 34.6% in Sukumvit (Sukumvit Soi 1-63 and Sukumvit Soi 2-44), 8.2% in Pathumwan (Phaayathai and Phaholyothin Roads) and 29.6% in Riverside. (Rama lll, Charoen Krung and Charoen Nakon Roads).

The luxury and high-end of the market is a good investment option say CBRE, as there will be limited supply in the future. In 2005 there were 1788 newly launched units positioned at the luxury and high end of the market. While there were 1097 newly launched units in 2006, representing a significant increase of 38.6%. It is expected in 2007 that there will be a similar number of new luxury and high-end condominium launches as there were in 2006.

“Luxury and high-end condominium units in downtown Bangkok, have been attracting a huge amount of interest from long-term investors. Even though the market has slowed down as a result of the political and economic situation,” said Aliwassa Pathnadabutr, managing director of CBRE Thailand.

“However, over the past few years’ long-term investors, who made profits from reselling or earning rental income from their units, have remained keen to purchase condominium properties in Bangkok because of their understanding and confidence in the market. Based on their experience, they are satisfied with investment returns in the form of capital appreciation and rental yields of 5-7%, which is higher than the current deposit account interest rate of 3.5%.”

The picture is not all rosy. Investors in the luxury and high-end markets are not only concerned about their finances, but lack confidence in the market because of negative factors in the political scene, the economy, and in society.

The middle end of the market is dominated by Thai buyers and investors. This was proved by the success of many projects such as Villa Ratchewi by TCC Capital Land, and Life Rachada-LadPrao by Asian Property Development. However Aliwassa says that the large number of new launches in the middle to low end of the market may lead to an oversupply at some stage. In 2005 there were 2688. newly launched units positioned at the middle to the lower end of the market and located in downtown Bangkok. While there were 7630 newly launched units in the downtown area of Bangkok in 2006 representing a soar of 184%. In the first quarter of 2007 alone, 1367 new units were announced.

So with the middle end of the market running the risk of oversupply. The luxury segment appears to be investor’s best bet.

CB Richard Ellis, forecasts that there will be a limited supply of luxury and high-end condominium units. Whilst demand for residential condominiums for long-term investment will continue to be strong, particularly among those projects located in the CBD or along mass transit routes.

Prices will rise further especially for those units that meet the standards required by the luxury and high-end markets, and are of investment grade. With sustained yields of 5- 7% and improved historical capital gains acquired condominium units in prime positions are proving to be an attractive long-term investment choice for both Thai and foreign investors in the current economic conditions said Aliwassa.

Article Source: One of the larger projects in Brickell, the Mary Brickell Village, is believed to be completed by the end of 2006 and will then provide the Brickell neighborhood with a large number of new luxury condos. This could cause the prices to stabilize in Brickell, but don’t count on it. The completion of two other major condo projects in the Brickell region, the Plaza and Neo Lofts, did not cause the prices to plummet – quite the contrary.