Despite the lack of a V-shaped economic recovery following
the coup on 22 May 2014, there has been a rush to launch new condominium
projects in Q3 2014.
Although there was a decline in the number of launches in
the downtown area in this quarter, we expect to see an increasing number of new
condominium developments by the end of this year and the beginning of next year.
Record-breaking prices have been achieved in Q3 2014. CBRE
has recently sold a unit with a view of Lumpini Park in 185 Rajdamri, a project
which was completed in Q1 2014, for around THB 330,000 per square metre. CBRE
has also sold units at over THB 300,000 per square metre in four other
Prices of newly launched condominium projects in the
downtown locations will continue to rise due to high land price as well as
increasing construction cost.
However, developers need to be careful about overpricing in
downtown condominium projects.
Our main concern still lies in the midtown and suburban
market which has a high volume of supply. We
forecast that over 87,000 midtown and suburban condominium
units will be completed in the remainder 2014 and 2015. The completion of these
units will be a significant stress test for the market.
The key issue is how many speculative buyers of these units
will default and how many end-user buyers will be able to get mortgage loans.
Banks have tightened their mortgage criteria resulting from the risk of rising household
According to the Bank of Thailand, total household debt over
the past five years has accelerated from 69% of GDP in 2010 to 83% of GDP in
2014. This has made it even more difficult for endusers to secure loans from
It will be challenging to raise prices in the
midtown/suburban areas due to direct competition from resale units by speculators.
Apart from that, lump sum affordability is also essential to sell condominium
units in the midtown/suburban areas.
Buyers are not the only party affected by economic stress.
Developer funding has become tighter as well, which is why we have seen several
developers forming joint ventures with both Thai and foreign investors.
We expect to see an increasing number of condominium launches
at the end of this year. Developers are under continuous pressure to clear
their inventory, which compels them to boost sales through campaigns and promotions.
While there were impressive response from buyers to some newly launched
projects this quarter, the lack of V-shaped economic recovery may potentially
restrict residential demand, which would result in increased competition in the
condominium market at the end of this year and the beginning of next year.