Bangkok beckons: 2018 property overview

By Charlene Chin

/ EdgeProp |

January 3, 2019 7:00 AM SGT

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Public-listed Thai property developer Sansiri showcased four of its Bangkok projects in Singapore over the weekend of Nov 24 and 25. The projects were XT Ekkamai in Sukhumvit; XT Phayathai, located within a five-minute walk of the Phayathai BTS station; The Base Saphanmai, located a five-minute drive from the Don Mueang Airport; and The Line Wongsawang, just 200m from the Wongsawang train station.

According to Sansiri, pre-sales to foreign property buyers totalled THB12.56 billion ($526.4 million) as at Nov 5, which means it is close to achieving its target of THB13 billion for the full year. The firm is projecting a 40% increase in international property sales from last year.

The Bangkok residential market saw a higher concentration of launches in 2H2018 than in 1H2018, according to James Pitchon, executive director of research and consulting at CBRE Thailand. Most of these launches in the latter part of the year were located on extensions of the mass transit line, he notes. The average price of new condos launched as at 3Q2018 was THB137,933 psm, up 26.4% y-o-y, says CBRE.

Foreign interest in Bangkok’s residential launches has come mainly from Chinese buyers, notes Pitchon. “Some developers have become very reliant on sales to foreigners and have, in some cases, reached the 49% limit, which was very rare in the past.”

Bangkok is also a popular destination for Singaporean investors. Based on CBRE data, Singapore buyers made up the ninth-largest group of foreign purchasers in Bangkok.

Next year, emerging markets such as Bangkok, Cambodia and Ho Chi Minh City are expected to continue to attract Singaporean investors looking for alternative markets, says Doris Tan, regional director of Strawberry Star property group.

Sales to Chinese purchasers and other foreigners are expected to slow in 2019, though, says CBRE Thailand. “In some cases, foreign purchasers have been promised unrealistic returns such as 7% to 8% yields and price increases of 10% a year,” says Pitchon. “In many cases, these returns are unlikely to be achieved and overseas sentiment towards Thai property could change.”

There are no property cooling measures to deter foreign buyers in Thailand. Amid concerns over elevated household debt, however, Thailand’s central bank tightened borrowing criteria for domestic home purchasers in October. With effect from Jan 1, 2019, buyers of homes worth more than THB10 million, or buyers of second homes are required to make down payments of at least 20%. Loan-to-value ratios have also been capped at 80%. Banks will be restricted from providing loan advances that exceed the value of a property.

As a result, CBRE expects domestic demand for residential properties to contract. More developers are expected to turn to foreign buyers to make up for the shortfall. Foreign buyers “pay primarily from their own funds”, as they are unable to obtain mortgage financing from Thai banks, notes Pitchon.

On the one hand, home sales are expected to slow, as a result of reduced local end-user demand. Rents are expected to stay flat. The expatriate population, which accounts for 95% of the rental market in the CBD, is expected to stay stagnant next year. As prices have risen while rents have not, yields are expected to be compressed. On the other hand, Bangkok is set to face a “huge wave of infrastructure investment”, says a report released by Urban Land Institute and PwC in November. These investments are expected to transform public transport in Bangkok and open up a number of new locations for real estate investment and development. This development will bode well for real estate prices and rents of future projects located along these new public transport lines.

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