If you now drive around Bangkok you would probably notice all those new constructions that are mushrooming around the cities “hot” districts; i.e.: close to famous roads such as Sathorn, Silom and Sukhumvit for condominiums; and in the suburbs such as Nonthaburi, Rangsit, ChangWattana for housing estates. In fact, there seem to be a very high demand especially for modern developments launched by companies such as “Land & House”, “Asian Property Development”, “Pruksa Real Estate” or “SC Asser Corporation” etc… (more than 30 projects will be launched by the end of the year)

Having recently taken part in a “condominium auction” in the center of Bangkok has confirmed our thoughts of what seem to be a “sellers” market (excess of demand over supply). Arriving 45 minutes before the opening was not long enough to give us a head start; there were already about a hundred people lining up (being the first would allow you to get the best spots in the building, with nice view’s, etc.).

When talking to the “prospective buyers” around us we realized that most people at this auction where here to buy and rent out their condo, thus buying it as an “investment” (a single person would end up booking two or three, priced between USD75000 to USD175000 each). According to the “trading screens” (picture bellow), the developer sold about 65 % of all of the units that day; Amazing isn’t it?

Looking back, we all remember the Asian crisis in 1997 (which left many constructions idle in downtown Bangkok due to bad loans)? Well today, there seem to be little concern of a developing property bubble since Thailand’s economy is now more robust then in the 90’s: higher foreign exchange reserves, solid financial market and lower corporate debt. Additionally, interest rates are now relatively low and it is thus easier for young professionals to obtain credits.

This booming trend has already been going on for a while (4-5 years); so until when will at last? Hard to say, will have to follow this trend closely for the next 2-3 years; what is sure is that Thai people (more specifically middle to high class income workers) have a need of “modern” living to match their changing lifestyles. In fact, a “new” standard of quality has emerged and is closer to “western” design and quality standards.

One of the major concerns comes from investors seeking to rent out their condos or buying it as a “second home”. Typically they invest in their condo 2-3 years before the building even breaks ground and make about 25 to 35 % of a building’s occupancy. In reality, this could actually “fake the demand” and risk an “oversupply” in the short term. Furthermore, new buyers would be hit most if this “boom” busts as they are clearly paying a slight premium to be able to “choose”.

Finally, if you are thinking of purchasing a condo in Bangkok you should be aware of the following:

- In general, Thai people like to buy “new”, so if you are buying a new condo with the purpose of selling it in 10 years, maybe not the best idea; they will not pay a premium price for a second hand condo so renting it out would be wiser. If you do, make sure the location is appropriate; close to public transport, universities, government complexes etc…

- Also, you should be aware that condo buildings usually age relatively bad. Constant maintenance is needed and construction standards are still not what they are in the West. Additionally, overall “arbitrage” is a “huge headache”.

So think about it twice! Next week will be continuing our epilogue on “business in Asia” with the current Shanghai Expo!

Auction entrance: with more than 100 people in line...

Waiting area

Red=Sold /Blue= still available (20 minutes after opening)
Mokup of the building which will be finished in 3 years...