The outlook for the luxury home market in Thailand remains bright

While most of the world’s markets are affected by the Covid-19 pandemic, in Bangkok homes priced at 10 million baht (RM 1.29 million) and above still look promising in the second half of 2021 (2H2021 ), according to Knight Frank’s “Bangkok Luxury House Report Market Overview 1h 2021”.

The report says this is because the core group of home buyers for the luxury real estate segment in Bangkok has not been affected by the economic contractions caused by the Covid-19 outbreak, and they have also remained immune to the tightening of bank lending conditions.

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

During 2H2021, large-scale developers should be more careful in launching new projects.

“They also tend to expand their low-rise project developments into suburban areas such as the north and west areas of Bangkok, which still have space to develop at land prices that are not very high compared to the area. city, ”the report said, adding that these suburban areas tend to grow steadily given the development of new train lines, large mixed-use projects, shopping malls, office buildings, etc.

As a result, buyers have more choices in residential locations that can meet their needs. It should be noted that these projects were able to close sales in a short period of time, which encouraged developers to continue investing in single, detached and townhouse projects. The new supply, however, exceeds demand and may cause the market to slow down, as the luxury home market remains a relatively small segment with limited demand, according to the report.

1H2021 saw above average sales

According to the report, there were a total of 1,610 new units sold in 1H2021, which is a relatively high number of units sold compared to previous years when the average number of new units sold was only about 2,500 units per year. In 2H2021, the number of new units sold is expected to increase to nearly 3,000 units.

There are 224 projects offering a total of 20,018 luxury homes priced at 10 million baht or more per unit as of 1H2021. Of this amount, 13,276 units were sold, for a sales rate of 66%. The sales rate has been steadily increasing every year since 2015, when it was 30%.

“The highest demand was for homes with sale prices between 10 and 20 million baht, rising to 7,218 units, followed by homes with selling prices between 21 and 30 million baht and 31 and 40 million. million baht, with a demand of 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 homes priced between 21 and 30 million baht, and 51 and 60 million baht, at 77% and 74%, respectively. Meanwhile, homes priced between 61 and 70 million baht had the lowest demand and sale rate, ”the report noted.

As for the supply of land to build these houses, from 2017 to May 2021, the supply varied 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, 578 land allotment permits were granted for houses priced at 10 million baht or more.

Developers need to improve their game

In addition to the style, location and quality of the home, which play a role in buyers’ decisions, developers should consider the setting and facilities on site as well as the environment in front of the project as this could improve the unique selling point for developers.

Typically, real estate developers see the market demand, but more and more of them are venturing into this segment, which could increase future supply, putting pressure on future price growth.

“This has intensified the competition and widened the variety of purchasing options. However, if developers are able to implement projects with outstanding characteristics, including designs that meet the needs of residents, their project may be successful, ”the report concludes.

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

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