Post-pandemic, the property market in Bangkok, and Thailand as a whole, is expected to rebound strongly as a result of the strong tourism industry and big improvements in transport infrastructure.
The Thai property market is huge and attracts investors from around the world. According to the Agency for Real Estate Affairs which is the largest real estate information centre in Thailand, there are currently 376,757 housing units available for sale from developers.
Each unit is worth on average about Baht 2.82 million (USD 90,935). Therefore, the overall overhang value of these developments is as large as USD34.26 billion. It is estimated that the absorption rate could take another two years or longer due to new supplies coming in over time.
What is significant is that most of the available units for sale are in the Bangkok Metropolitan Region (BMR) consisting of Bangkok and five surrounding provinces. This is similar to Jabodetabek (Greater Jakarta) which consists of Jakarta and its surrounding provinces. To be exact, 226,645 units are still available in the BMR and another 150,112 units in other provinces.
Thailand has 76 provinces, but most housing developments are located in Bangkok. This is because there is no other urban centre in Thailand other than Bangkok where the population is over one million.
Between 1994 and 2021, Pruksa Real Estate Public Company Limited (PS), the largest real estate developer in Thailand built over 707 housing projects worth Baht 538.35 billion or USD 17.376 billion. The projects have about 245,493 units for sales, a figure that’s 50% larger than that of the National Housing Authority.
Other renowned developers include Asian Properties Plc, Sansiri Plc, Land & House, Plc and Supalai Plc. The 10 largest developers in Thailand developed some 32% of the total value of the overall housing developments.
During the first two quarters of 2021, only 44 real estate projects, mostly residential were newly launched. The total number of units were 9,561 worth about Baht 70.23 billion or USD 2.27 billion. This clearly indicates that launches of new real estate developments in 2021 have declined compared to the previous year.
Agency for Real Estate Affairs estimated that the overall housing units launched in 2021 would be 60,151 down 18% from 73,043 units launched in 2020.
During the first quarter of 2021, some 50 public companies and their subsidiaries launched 71% of the total new housing supply, indicating that larger and stronger companies can still survive during this pandemic.
Housing worth over USD300,000 per unit catering mainly to high income groups are still performing well. On the other hand, low-cost housing units (USD 80,000 per unit) cannot be sold resulting in some small developers owing loan arrears to financial institutions. The pandemic has unfortunately made lower income families poorer hence making it harder to buy a house.
Fall in Valuation
In Bangkok, apart from housing, other developments are also not faring well particularly commercial properties. The Thai Appraisal and Estate Agents Foundation recently published the annual capitalization rate for 2021 in Thailand and found as follows:
1. Warehouse/Factory: 5-7%
2. Shopping centre: 6-7%
3. Office building: 6-8% in the CBD; 5-7% in the outskirts.
4. Serviced Apartments: 5-7% in the CBD; 5-6% in the outskirts
5. Rental Apartments: 3-4%
6. Hotels: no capitalization rate because of the pandemic resulting in no income.
The pandemic results in less need for office spaces and hotels. Today, Bangkok has some 9 million sq metres of office spaces renting at Baht 700 per sq metre (USD 23psm). The supply is expected to increase to 10 million sq metres soon. However, demand might slack off due to the increasing ‘work from home’ workstyle.
In the case of hotels, their value is expected to fall 20% if they have no income for 2-3 years. And if the hotel property is under loan, the value might even fall 60%.
In addition, the Thai Appraisal & Estate Agents Foundation also conducted the standard cost of construction for Bangkok as a base for property valuation in Thailand. Some selected costs are as follows:
1. Detached house: Baht 12,400 per sq metre (USD 400psm).
2. Rowhouses: Baht 11,100 per sq metre (USD 358psm).
3. Apartments (25-36 floors): Baht 25,000 per sq metre (USD 806psm).
4. Office Building (21-35 floors): Baht 26,400 per sq metre (USD 852psm).
During the first four months of 2021, the price of steel increased by 20% which has the effect of increasing construction costs by 2.7%. This poses no significant impact to the industry. However, steel price is still rising; we estimate that if steel price increases by over 35%, it would cause prices of property to rise.
Last but not least, land prices in Bangkok is still stable. The most expensive areas are Siam Square, Chit Lom and Ploen Chit. Land price is valued at Baht 825,000 per sq metre (USD 26,613 psm or USD 2,472 per sq foot). This area is suitable for shopping centres which can expect rental of net lettable area of Baht 3,100 or USD 100 per sq metre per month. Overall, land prices rose by 8% in 2020 and 6% in 2021.
After the pandemic, we expect the property market in Bangkok, and Thailand as a whole, to rebound as a result of the strong tourism industry and big improvements in transport infrastructure such as the current massive construction of the mass transit in Bangkok, plus railways and motorways to other regions in Thailand. APR