In the Bangkok Post yesterday there was an article teaching regular folk on how they can invest in condominiums to make $$, this combined with every property developer showing fantastic presales (even stable, stodgy Land & houses just reported their highest presales in the history of the company) and firms such as Ananda launching new projects in Asoke where a 35 sqm condo costs nearly THB 10 mn has people whispering louder if things are getting out of hand.

I have my usual 2 arguments for this:

The bullish one

  • Land available around Sukhumvit/Silom is dwinlding, prime properties are now going for top dollar and if any developer wants to make a half decent profit then THB 200k/sqm prices are going to be a norm
  • The BTS/MRT expansions will open up new locations for people to live at to commute to work or for entertainment
  • Thailand arguably is a center for SE Asia for businesses, foreign demand is still seen in both the buying and rental side of the industry.
  • Construction costs still continue to rise.

The bearish one

  • How many “rich” people can afford to pay these prices, in the past we argued it was simple the parents buying multiple units for their children and investments
  • The average rental yield now is approaching 5%, cost of funding for a mortgage is still 6-8%, where’s the balance in the market?
  • The second hand market in Thailand for condominiums does not exist, anytime a building has passed an age of 5 years (on average there are 1-2 exceptions) demand for it decreases.
  • Interest rates will rise one day, cheap financing will disappear, other options for investment will appear.
  • These apparently sold out condominiums along the BTS lines still look rather empty.

Anyways, I’m not a property expert as my friend at JLL loves to remind me, but in the end we are all looking for the same thing whether it be equities or property, an attractively valued investment and right now, there’s a lot of fluff in the Bangkok Condo Market.

She suggests a formula for condo investment with some powerful figures — 2, 8, 20, 80. 2 means a two-month take-up rate. A condo unit should be rented out within two months or left vacant no longer than two months. 8 is for a rental return of 8%, higher than the mortgage interest rate.
20 is for buying a unit at 20% below market price to earn a profit. 80 refers to an occupancy rate of 80% in a condo building.

Source: Bangkok Post

  1. its the land available to build on that is shrinking
    the costs to build is also on rise with inflation

    i cannot understand why people dont get into the second hand market as the buildings are better constructed and have not skim pt on things like thick cement floor and double brick walls
    try finding that in these new 200k psm places

    with a second hand home you get a proven product
    off the plan you get RISK and perhaps not what you paid for

    when will people learn

  2. Nice stats from yrfriend JLL
    Just wondering where it the market now youcan purchase a propertyfor 8 % returneven if ‘ fully furnished’, property prices here are in the main fully valued as in most worldwide markets

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