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Rising inner city land prices fuels luxury condo boom

Jul 20, 2017 | Emerging Trends, Thailand

As prime land locations in inner city Bangkok, Pattaya and Phuket become increasingly scarce, the demand for luxury condos grows, certainly according to Major Development Plc, a SET-listed developer.

It appears that although there have been concerns surrounding the long term economic outlook, those with a high purchasing power have been largely unaffected. Indeed, investors are seeing this as an opportunity as rental yields will inevitably increase proportionately with the increased land prices.

In an interview conducted with the Bangkok Post, the managing director of Major Development, Suriya Poolvoralaks said: “Despite a sluggish economy, buyers in the luxury segment will not dump a unit on which they have made a down-payment as they won’t feel much impact from the economic slowdown. The lower-end segment is struggling with purchasing power and mortgage loan rejections.”

 

It is fair to say that Mr. Suriya sees a bright future for quality developments in prime locations with the units being priced in excess of THB200,000 per square metre. Buyers and invested had baulked at these prices just two or three years ago but now appear to see these amounts as acceptable.

Wealthy investors from home and abroad are seeing huge potential in luxury condominiums in prime locations as they are witnessing their values rise year on year. This coupled with the fact that demand for high end rental properties appears to be still on the increase sees the purchase of luxury properties as excellent, relatively low risk investments. If rental guarantee concepts are also thrown into the bargain then this only adds to the attraction.

Mr. Suriya was also keen to stress that financial institutions tended to favour properties in the high-end segment. Many offer attractive packages such as 0% instalments for nine months with no penalties if the full amounts are paid early. This has contributed to the notable increase in the number of developers shifting towards the luxury segment.

When referring to an upmarket development in business district of Bangkok, Mr Suriya said “We have strong confidence in the luxury segment, given our project near Sukhumvit Soi 39 where we have seen an increase of 25% in selling prices in three years to THB300,000 per square metre.

“The project value is also higher, rising from THB6.5 billion since the launch in 2014 to over THB7 billion at the moment.”

The area of Phrom Phong close by has also seen a dramatic increase in land prices over the last four years with current prices now around THB2 million per square wah compared to THB1.4 million previously.
Such is the demand for luxury properties in the capital, the company has now opened talks with land owners in the central business district regarding the purchase of land with the view to building more condos with units priced at THB300,000 per square metre.

It is apparent that demand for properties that can be rented out is high as not only are the yields attractive but significant capital gains can also be made. Inner city rental rates are sure to increase so it is very evident why this is the case. Rental return guarantees offered by some developers in other locations such as Phuket, Pattaya and Samui have also proved popular proving that there is maybe a shift towards this type of development.

Luxury condominiums are certainly experiencing a boom at the present time and one thing that is certain is that land prices will continue to rise so it is hard to envisage this ending any time soon.

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