Condos to bear brunt of Covid-19 property impact in Bangkok

By Charlene Chin

/ EdgeProp Singapore |

February 28, 2020 8:06 AM SGT

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Bangkok’s condominium market is expected to take the brunt of the blow in 1Q2020 amid the Covid-19 virus outbreak, as Chinese buyers typically constitute the largest group of foreign buyers for these developments, says property consultant Edmund Tie.

The consultancy has revised downwards its forecast for the average take-up rate of newly launched condos in the CBD area to about 25% for 1Q2020, from 36% in 4Q2019.

The impact of the outbreak on the residential market targeting overseas buyers is “more obvious”, especially for condos priced from THB4 million to THB5 million ($175,600 to $219,500), the property consultant tells EdgeProp Singapore. Some Chinese buy such properties as holiday homes, while others buy them for investment, it explains.

Chinese demand is particularly high for high-yield locations, near public transport – BTS (Bangkok Mass Transit System) and MRT (Metropolitan Rapid Transit) stations. Buyers from China also tend to purchase condo projects where there are already a majority of Chinese homeowners since they prefer to live in the same community, it says.

In any condo project in Thailand, foreigners are allowed to own up to 49% of units, but they are not allowed to own land.

Local demand for condos is, however, expected to be less affected by Covid-19, especially from the high-income group as they continue expanding their asset portfolio, or purchase properties for their children.

New condo project completions in 1Q2020 in the CBD, Sukhumvit area, are expected to inject a supply of 2,290 units into the existing pipeline. The only high-end project in the CBD expected to be completed in 1Q2020 is The Esse at Singha Complex, which will add 319 units to existing supply.

Some condo launches that were initially set to launch in January this year have been postponed, with some developers launching for sale certain floors that are intended only for Thai buyers.

In 4Q2019, new condos launched in Bangkok yielded 14,204 units, double the 6,652 units in 3Q2019. The surge in supply was partly stimulated by the government’s tax incentive – a reduction of transfer fee from 2% to 0.01%, and mortgage fees, from 1% to 0.01% - applicable for housing projects and condos valued at THB3 million or less.

Of the launch numbers in 4Q2019, 12% or 1,694 units were for new launches in the CBD.

Amid weaker demand in 1Q2020, Edmund Tie expects developers to provide attractive promotions for potential home buyers, adding that Bangkok’s condo market, which “used to be a haven for speculators, has now become a buyer’s market”.

Retail market expected to take a downturn

In the retail segment, new malls in Bangkok are expected to postpone their official opening dates to beyond 1Q2020, adopting a wait-and-see approach given weaker traffic due to the outbreak (Picture: Shutterstock)

In the retail segment, Edmund Tie foresees new malls in Bangkok postponing their official opening dates to beyond 1Q2020, adopting a wait-and-see approach given weaker traffic due to the outbreak.

Among the new malls expected to be completed in this quarter are Donki Mall @ The Market Bangkok (4,000 sq m or 43,000 sq ft), Spring Tower (1,266 sq m), and Sunny at Summer Lasalle (5,000 sq m), adding a total leasable area of 10,266 sq m to retail supply.

Despite promotions and privileges being offered to shoppers, retail sales have fallen by 20% to 30% since the Covid-19 outbreak. This could lead to rental negotiations between tenants and landlords, especially those who pay rental as a percentage of their gross profit, says the consultancy.

In 4Q2019, retail stock in Bangkok’s downtown area saw a 1.2% uptick to about 1.48 million sq m. Average monthly rent in downtown Bangkok for the quarter remained robust, increasing to THB2,650 psm, from THB2,600 in 3Q2019.

Meanwhile, malls in the midtown area also recorded an increase in average monthly rents to THB1,615 in 4Q2019, from THB1,605 in 3Q2019.

For the last quarter of 2019, Edmund Tie has observed a higher mix of tenants requiring larger areas for spaces such as fitness centres, yoga centres, boxing schools, music schools, beauty salons and spas, as well as those for children leisure activities.

Office market to show more resilience

Edmund Tie forecasts that the office market will show more resilience amid the virus outbreak. “Business goes on as usual, people are just more aware of the outbreak and protect themselves by wearing masks in crowded areas,” it observes.

However, it cautions that plans for some new office developments could be suspended as the outbreak is weakening Thailand’s overall economic growth, especially the tourism industry, which is the key revenue source for the country.

In 4Q2019, Bangkok’s office space supply stood at 8.71 million sq m, increasing slightly q-o-q following the completion of CP Tower North Park (25,500 sq m) outside the CBD.

Occupancy rate-wise, prime office spaces in the CBD continued to enjoy an uptrend, increasing 94.7% in 4Q2019, from 92.7% y-o-y. Such spaces – newly completed offerings in prime locations with direct links to MRT and BRT stations – continue to attract tenants.

Rents in the prime office space have also increased, climbing to THB1,090 psm per month in 4Q2019 from THB1,075 in 3Q2019.

Edmund Tie notes that there has been rising demand for retail facilities within office buildings, such as F&B outlets, convenience stores, food courts, banking services and restaurants.

In the CBD, new office buildings that are slated for completion in 1Q2020 include The Parq Phase I (63,000 sq m), Vanissa Building (25,000 sq m) and Office @ EmSphere (20,000 sq m), injecting a new supply of 108,000 sq m in the CBD.

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