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Outlook for luxury home market in Thailand remains promising

While most global markets are battered by the Covid-19 pandemic, in Bangkok, homes priced 10 million baht (RM1.29 million) and above still look promising in the second half of 2021 (2H2021), according to Knight Frank’s “Bangkok Luxury House Market Overview 1H 2021” report.

The report said this is due to the fact that the core group of homebuyers for Bangkok’s luxury property segment has not been affected by the economic contractions caused by the Covid-19 epidemic, and they have also remained immune to the tightening of bank credit terms.

Overall, Knight Frank said these buyers are financially secure and can normally afford to buy homes. In fact, most of them can purchase with cash rather than relying on loans, despite the lower interest rates.

During the 2H2021, large scale developers are expected to be more cautious in launching new projects.

“They also tend to expand their developments of low-rise projects in suburban areas such as the northern and western zones of Bangkok, which still have spaces to develop at land prices that are not very high compared to the city,” said the report, adding that such suburban areas tend to grow steadily given the development of new train routes, large mixed-use projects, shopping centres, office buildings, etc.

As a result, buyers have more choices in residential locations that can cater to their needs. It is noteworthy to highlight that those projects have been able to close sales within a short period of time, which has encouraged developers to keep investing in single, detached house and townhouse projects. The new supply, however, exceeds demand and may cause the market to slow, given that the luxury home market remains a relatively small segment with limited demand, the report said.

1H2021 saw above-average sales

According to the report, there were a total of 1,610 new units sold during 1H2021, which represents a relatively high number of units sold compared to the previous years where the average number of new units sold was only about 2,500 units per year. In 2H2021, it is expected that the number of new units sold will increase to almost 3,000 units.

There are 224 projects offering a total of 20,018 luxury homes priced 10 million baht or more per unit in 1H2021. Of this amount, 13,276 units were sold, representing a sale rate of 66%. The sale rate has continuously increased every year since 2015, when it was 30%.

“The most demand was for homes with selling prices between 10 and 20 million baht, increasing to 7,218 units, followed by houses with sale prices between 21 and 30 million baht, and 31 and 40 million baht, with demand at 2,612 units and 1,871 units, respectively.

“Given their limited supply, homes priced above 100 million baht enjoyed the highest sale rate of 3%; this was followed by the sale rate of houses priced between 21 and 30 million baht, and 51 and 60 million baht, at 77% and 74%, respectively. Meanwhile, houses with prices between 61 and 70 million baht had the lowest demand and sale rate,” the report pointed out.

As for the supply of land to build these houses, from 2017 to May 2021, the supply ranged from 1,489 units to 2,278 units per year. The number of permits was at its highest in 2018, at 2,669 units. In the first five months of this year, there were 578 land allocation permits granted for houses with a price tag of 10 million baht or more.

Developers need to level up their game

Aside from house style, location and quality, which play a role in homebuyers’ decisions, developers must consider the on-site setting and facilities as well as the environment in front of the project as this could enhance the unique selling point for the developers.

Generally, property developers are seeing the market demand, but there is an increasing number of them venturing into this segment, which might push up future supply, hence putting pressure on future price growth.

“This has intensified competition and widened the variety of buyer options. However, if developers are able to put out projects with outstanding features, including designs that meet the needs of residents, their project would be able to achieve success,” the report concluded. 

This story first appeared in the EdgeProp.my E-weekly on Sept 3, 2021. You can access back issues here.

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