Preference for new buildings dampens prices of older condos

In many developed Western markets, it is possible to value a property per square metre by location, but clearly in Bangkok this is not the case, the real-estate advisory company’s report states.

A purchaser looking at any location in Bangkok will still see a huge difference in price per square metre for new off-plan sales compared with even the asking prices at older properties.

A good example is Sukhumvit Soi 24, one of the most popular condominium locations in Bangkok, where CBRE sees a wide range of prices.

“The oldest condominium on the street is Grand Ville House I, completed in 1981, where a current asking resale price is Bt60,000 per square metre. 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 Bt60,000 per square metre.

“The most recently launched project on the street is Park 24, launched in the fourth quarter of 2013, where a current average asking price for units for sale by the developer is Bt210,000 per square metre,” said Pornpimol Phuengkhuankhan, director of residential sales services at CBRE Thailand. More than 29,000 condominium units were completed in downtown Bangkok after 1989 up to the Asian financial crisis in 1997. Many of these buildings were not well designed, either in terms of layout or specification, and 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, Pornpimol said.

However, a number of buildings completed in the second condominium cycle starting in 2002 have fared better, she said, adding 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 Bt200,000 per square metre from the average launch price of around Bt100,000 per square metre in 2004.

These prices are still below the achievable price for a similar-sized project with a similar specification launched off-plan today in a similar location. For example, the initial asking price at Nimit Langsuan, launched off-plan in the first quarter of this year, was Bt300,000 per square metre.

The low current prices 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; buyers, especially Thais, prefer new buildings, Pornpimol said.

There are a number of factors that affect condominium prices, including land availability in the city centre, the possibility for redevelopment sale, and an expatriate market in which rising rents may push up resale prices of completed units. According to James Pitchon, executive director and 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 older buildings in the city centre, as it means less competition from new supply and high potential for price rises due to limited supply, he said.

Also, the balance between land prices and construction costs is changing. For the first time in central Bangkok, the price of land 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 per cent to 60 per cent of the total development costs, he added.