The overall performance of condominium market sector was outstanding given the unfavourable economy throughout the year. Completed downtown supply reached 50,000 units in the third quarter of this year and will be about 52,600 units at the end of the year. Occupancy rates of existing condominiums in the downtown area have been increasing steadily throughout the year to about 87% at present.
The average price of grade A condominiums rose from 110,000 baht per square metre in the first quarter to about 123,000 baht per square metre, and is expected to be over 126,000 baht per square metre by the end of 2007, rising by about 12% from the beginning of the year.
The emerging "Skytrain" generation and the changing lifestyle of city dwellers have been key drivers for the mid-range condominium market in secondary locations. The mid-range condominium market, mostly priced between 65,000 - 80,000 baht per square metre, has been active throughout the year. 1,656 mid-range units will have been completed in downtown Bangkok in 2007, representing a 13.4% increase y-o-y. In the next few years, more than 2,800 new units are expected to be completed in this segment in downtown Bangkok.
There will be approximately 8,700 new units due to be completed in 2008 as opposed to about 6,300 completed units this year. The majority of future supply will be concentrated in the Sukhumvit and Riverside/Rama III areas, followed by Pathumwan, Silom/Sathorn, and Central Lumpini.
Expatriate Rental Apartment Market :
The expatriate apartment market continued to perform well despite a 6.6% increase in supply and completion from rental units in condominiums. The average occupancy is likely to drop slightly from 89% last year to about 86% by the end of this year.
The number of expatriates with work permits in Bangkok grew to 71,401 in August 2007, a 9.3% increase from last year.
The average achieved rents for grade A apartments dropped in all areas by 2-8% while average achieved grade B rents managed to increase slightly during the year.
The apartment supply in the downtown area is expected to rise slowly at a rate of about 3% next year, while the number of expatriates is likely to increase at a faster rate in 2008. The average rental rate may be stable in the short term as housing allowances are not being increased. Rentals of new and newly renovated apartments, however, could push up the average rent in the longer term.
Serviced Apartment Market :
The total supply of serviced apartments will reach 10,756 units at the end of this year, increasing by 21.6% y-o-y. Demand, however, was weak due to political instability and the sluggish economy. Demand from tourists also slowed. The average occupancy rate is expected to drop to about 79% for 2007 compared to 83% recorded last year. The average achieved rent has increased only slightly this year by about 1%.
The increase in supply will continue to put more pressure on rents and occupancy rates. There will be more than 2,000 new units completed in 2008. The pressure from the supply side together with the current weaker-than-average demand could limit increases in occupancy and rental rates next year unless demand increases. We will see more serviced apartments targeting daily guests to help maintain their revenues.
