Budgets of top-end home buyers on the rise

The highest-value transaction this year has been a condominium unit worth Bt247 million.

Based on CBRE’s sales records for our top 100 transactions, the top 10 transactions were between Bt100 million and Bt247 million, followed by Bt60 million to Bt90 million for the next 10.

The remaining 80 per cent of the top deals were valued between Bt40 million and Bt60 million.

While these transactions represent only a handful of deals in the total residential market, it is a strong testament of demand and purchasing power at the top end of the market.

So what are the affluent investors buying into? A breakdown of the transactions shows that 73 per cent were for condominiums, while the remaining 27 per cent were luxury housing in the central business districts (CBDs).

Of the condominium transactions, most were in prime off-plan projects such as Marque Sukhumvit, Tela Thonglor, Magnolias Waterfront Residences @ ICONSIAM, Nimit Langsuan, Four Seasons Private Residences Bangkok and The Ritz-Carlton Residences, Bangkok.

There were also high-value transactions involving older existing condominiums at The Infinity, Domus, The Park Chidlom and The Sukhothai Residences, which are well-managed buildings in good locations that have shown a consistent capital appreciation.

The remaining transactions were in off-plan housing projects, such as Parc Priva and The Quarter Collection.

The majority of the buyers for these high-value units were local Thais, accounting for up to 81 out of the 100 transactions. As with the overall market trend, foreigners continue to account for a more limited percentage of the market.

The most important factor we would need to understand is why they are buying into these top-end properties at record-breaking prices. Our records indicate 62 per cent of these deals are for own use, and the remaining 38 per cent for investment purposes.

Providing these transactions are larger units with at least two bedrooms, buyers view these properties as alternative living to traditional suburban single houses.

The trend for condominium living has clearly taken off in the past five years, generating demand for CBD units. The trend began with the rich young generation moving away from the joint-family system before marriage, followed by the older generation, who today are also viewing CBD living as an alternative if they can find and afford a spacious unit within a well-located development.

The shift towards smaller families and away from big single houses has played a key part in this trend.

Combined, three- and four-bedroom units and penthouses account for only 4 per cent of the total downtown market, yet there is real demand underpinned by these end-users.

The market segment buying for investment purposes for these types of units typically has a longer-term horizon, unlike speculative investors.

Traditional Thai and Chinese families who have invested their family fortunes in land in the past are now viewing condominium investment in the same way.

In the present market, where prime land sites have become unaffordable and rarely available, these investors are now beginning to shift their money into residential.

Land investments in prime locations have switched to high-value condominium units in similar locations instead, although investors still view it as an asset that can be passed down to the next generation and a clearly better alternative to holding cash in fixed savings with low interest.

Whilst our analysis is not representative of the whole residential market, it is a testament of the strength of the top-end market, which appears to be unaffected by external factors.

In line with the buyers’ increased budgets, developers of these top-quality developments have also sought to deliver an improved product offering both in terms of design and quality to match up to the price tags.