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Offices, Condominiums and Apartments – How Have Things Changed In The Past 10 Years In Bangkok?
Hi. I have been working as a real estate agent in Bangkok since 2006. During this time I have seen some changes, but surprisingly very little has changed. Let me explain.
Bangkok Apartment Rental Prices 2008 – 2018
Rental prices for most apartment buildings have increased very slightly over the past 10 years. While a spacious 3-bedroom apartment in the Sukhumvit area would have cost 70,000 baht 10 years ago, it can cost you 85,000 baht today. That’s only a 20% increase over 10 years, in fact far less than inflation, and in many ways an apartment is cheaper today than it was 10 years ago.
Why? It’s hard to say, but I guess ongoing political issues, 2 coups and a pretty stagnant economy that is just starting at around 3% GDP growth every year are the reasons. This level of growth may be acceptable for a world-leading developed country, but for Thailand which (let’s face it) still has some way to go in terms of development, it’s not very good.
The apartment rental market in Bangkok is mainly driven by expats. Thais don’t rent at these prices, either they don’t earn enough, they are savvy enough to buy property in the suburbs, or they are part of the immensely wealthy elite and already own several buildings in central Bangkok. As the number of expatriates has remained fairly constant, so have rental prices.
Newly built condominiums have seen an increase in rental prices, and there will always be a small percentage of people who have a decent budget and only want to live somewhere very new, which is especially true for Japanese renters. , but new buildings will get old and once they’ve been built and a rental price has been established, you’ll notice the price remaining relatively flat thereafter.
It’s actually the same with condominiums for sale. Once a building has completed construction, a sale price and a rental price are established, and it will remain stagnant at that level for years to come.
But prices have gone up in Bangkok, everyone knows that!! So am I wrong?
Bangkok Condominium Sale Prices 2008 – 2018
I don’t think I’m wrong. Some condominiums have experienced a very good level of capital appreciation over the past few years, but “on average” this is not the case.
Yes, the prices have increased significantly in Bangkok, and this is something that all the developers will be happy to promote to you when they sell you their brand new project. They will show you charts with an upward price trend and show you that prices are increasing by at least 5-10% year over year.
Prices for new buildings are up 5-10% year over year, but not for completed buildings.
This is mainly due to the increase in land prices. As land prices increase (and to some extent construction costs), so does the cost of new buildings. So new buildings are getting more and more expensive, but are completed buildings following suit?
No. And that’s why I’m not mistaken. A building that cost 150,000 Baht/m². 5 years ago, maybe now only 160,000 Baht m². In this example, about 1.5% compound growth. This building was brand new 5 years ago, and a brand new building still under construction today could cost you 200,000 Baht/m². i.e. 33% more than the new building 5 years ago, hence the compound growth of 5%++.
But the fact remains, the building YOU bought 5 years ago may have only grown by a compound 1.5% per year.
This is the current trend with Bangkok property. New buildings constantly set new price benchmarks and then stay the same. With even newer buildings adding a layer above, establishing new landmarks, and then remaining level. Even newer buildings, keep adding another layer on top.
This is why you will find such a difference in price between the buildings, even if they are located right next to each other. An example would be Lumpini 24, a new condominium located on Sukhumvit Soi 24, where prices will reach around 250,000 Baht/m². So, a small 2-bedroom unit of 60 sqm will cost around 15,000,000 Baht.
Next door is an old condominium called President Park, where prices have remained stagnant at around 60,000 Baht/m². Thus, a very spacious 3-bedroom unit of 260 m². will cost you around 15,000,000 Baht.
Four times bigger, next door, but at the same price! So the old adage “Location, location, location” doesn’t apply here. It is ONLY based on the age of the building.
Here is an example of a recent building for sale, 275m². asking for 80,000,000 Baht: http://www.property-bangkok.com/viewproperty.asp?id=587
Here is an example of an old building for sale in a similar location, 366 m². asking for 21,000,000 Baht: http://www.bangkokcondo.org/viewproperty.asp?id=614
Yes, the new condo is much nicer, better designed with a newer lobby and sparkling fixtures. But is the price variation fully justified. I mean, 4 times the price!
Keeping in mind that the interior of the new condo will age and need to be replaced, and if you purchased in the old building, you can remodel the interior to look brand new.
Anyway, whether you are buying into the new condominium or the old building is neither here nor there, the main question raised in this article is that the prices of new projects may well have increased, but a Once you’ve invested in your condominium unit, you may not realize the same level of growth as indicated by the developer.
The only ones who really see huge capital growth are landowners. And most of them are already very wealthy Thais, because non-Thais cannot own land. This does not help the majority of non-wealthy Thais who remain financially strapped.
Office rental prices have also remained fairly stable. Over the past 10 years, office rental prices have increased slightly, as have apartment buildings. However, as most investors (both Thai and foreign) seem obsessed with condominiums, the price of office for sale has also remained fairly static, and office units for sale arguably offer the best option for rental yields, since office leases are normally minimum 3 years, and you don’t need to renovate the office space as you would with a condominium, the former requiring a coat of whitewash, the latter new furniture, new bathrooms, new kitchen, etc.
That’s not to say it’s a bad idea to invest in real estate in Bangkok. But you have to look at office spaces and commercial properties as well as residences, and you have to look at the building very carefully, as I mentioned before, some condominiums have seen good growth over the last 10 years, while most did not.
You have to have a good eye. Good luck!
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