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Residential Real Estate Market Update: Q2 2021
AREA Press Release No. 597/2021: August 19, 2021

Dr.Sopon Pornchokchai, Ph.D. Dip.FIABCI, MRICS
President, Agency for Real Estate Affairs (AREA)

In Q2 2021, the residential real estate in Bangkok Metropolitan Regions (BMR) which takes up to 60% of the market share in Thailand, has a slowdown of sale rate at 2.6% per month. At this rate, the remaining 213,728 residential units in the market need approximately 3 years to be sold. However, the remaining stock is reducing due to a higher absorption rate. In Q4 2021, the remaining units could drop to 200,000 units. As the situation in the real estate market is not as bad as the covid-19 pandemic situation.

 

Dr. Sopon Pornchokchai, president of Agency for Real Estate Affairs Co., Ltd., the largest real estate information center in Thailand (www.area.co.th), has surveyed the launch of new real estate projects in the first half of 2021 (last surveyed in June 2021). This survey was conducted in many provinces which are Bangkok, Nonthaburi, Samutprakarn, Samut Sakhon, Nakhon Pathom (including Sampran and Nakhon Chai Sri district), some part of Ayutthaya which connects with Rangsit district, and some part of Chachoengsao which urbanization has expanded along the Eastern Economic Corridor (EEC) from Samut Prakan.

 

The survey has found 2,553 remaining residential projects which are still on sale from developers, which are the majority of the residential projects in Thailand. Since Bangkok Metropolitan Regions (BMR) is the biggest economic region in Thailand. However, some of these projects only have a small number of remaining units. There are approximately 2,130 projects with more than 20 remaining units which developers are still actively promoting projects.

 

The survey of 2,553 remaining residential projects by the Agency for Real Estate Affairs Co., Ltd. (AREA) in Q2 2021, is the latest and the broadest survey in Thailand. There are 735,519 remaining units which consisted of 361,706 condominiums (49%), 204,618 townhouses (28%), 106,179 detached houses (14%), and the rest are semi-detached houses, commercial buildings, and allocated lands. Most of the residential units (approximately 55%) are less than 3 million Baht per unit. There are only 5% of the residential units which are higher than 10 million Baht per unit. Hence, the average price of residential units is 4.131 million Baht per unit.

 

The market value of these remaining residential projects in Q2 2021 is 3.038 trillion Baht. Condominiums have the highest share in terms of market value at 1,384,423 million Baht (46% of the market value). Detached houses have a market value of 830,909 million Baht (27% of the market value). Townhouses have a market value of 549,301million Baht (18% of the market value). The rest are semi-detached houses (7%), commercial buildings (1.4%), and allocated lands (0.4%). Most of the residential units are less than 3 million Baht, share 55% of the overall units but only share 28% of market value. On the other hand, residential units which are higher than 10 million Baht, share 5% of the overall units but make up to 25% of market value.

 

The average market sale rate tends to slow down to 2.6% per month. If a residential project has 100 units, it can sell roughly 2.6 - 3 units per month. However, among the residential property types, condominiums have the highest sale rate of 3.2% per month. While townhouses have a sale rate of 2.2% per month, and detached houses have a sale rate of 1.6% per month. As condominiums attract demands for residential purposes and investment purposes, they can sell at a higher rate. Nevertheless, there are interesting pieces of information from the survey which are as followed.

         

  1. Detached houses that are higher than 10 million Baht per unit have a higher sale rate than detached houses which are lower than 10 million Baht per unit. This indicates that high-income households still have high purchasing power.
  2. Townhouses that are higher than 5 million Baht per unit have a higher sale rate than the lower segment, which indicates that high-income households still have high purchasing power.
  3. Condominiums that are higher than 10 million Baht per unit have a higher sale rate than the lower segment, which also indicates that high-income households still have high purchasing power.

However, if developers can produce a low-price condominium, approximately 1 million Baht per unit, it will also have a high sale rate. As it can attract demands for long-term investment and rental investment.

 

In Q2 2021, there are 213,728 remaining units that are waiting to be sold. This is a high number considering that there are 2 residents in 1 unit, these remaining units could support up to 427,456 residents. Which are higher than the population in Phuket province, or close to the population in Lamphun, Phrae, Uttaradit, or Nan. It does not mean that these remaining units cannot be sold, it means that they haven’t been bought yet. Some of these units are recently launched while some are still in the construction process. After all, the number of remaining units in Q2 2021 is less than 226,645 remaining units in Q4 2020, which indicates that it has been well absorbed in the first half of this year.

 

          Within 213,728 remaining units in Q2 2021, there are 86,734 condominiums (41%), 68,982 townhouses (33%), and 34,145 detached houses (16%). In terms of property types and price segmentation, the categories which have the highest number of remaining units are as followed.

 

  1. 2-3 million Baht townhouses have 33,753 remaining units or approximately 16%.
  2. 2-3 million Baht condominiums have 26,757 remaining units or approximately 13%.
  3. 1-2 million Baht condominiums have 24,537 remaining units or approximately 11%.
  4. 1-2 million Baht townhouses have 19,245 remaining units or approximately 9%.
  5. 5-10 million Baht detached houses have 15,683 remaining units or approximately 7%.

 

          It could be said that these housing categories are the most popular categories for buyers. These 5 categories above share 56% of the overall remaining residential units while others only share a small portion of the market. These 213,728 remaining units need approximately 39 months or around 3 years to be sold (if there are no new projects in the market). Condominiums have a higher sale rate than others which could be sold within 32 months. Townhouses need 46 months or almost 4 years to be sold. And detached houses need the longest time, around 62 months or almost 5 years to be sold.

 

There is one worrisome topic, within 213,728 remaining units, there are only 45,817 units (21%) that are 100% constructed. 3% of these remaining units have not been built, although it is on sale. 21% of these remaining units are in 1-19% construction process. 18% of these remaining units are in 20-39% construction process. 12% of these remaining units are in 40-59% construction process. 12% of these remaining units are in 60-79% construction process. And 13% of these remaining units are in 80-99% construction process. If we consider that units that are at least 60% constructed are believed to be finished, 46% of the remaining units are meant to be safe if any economic crisis occurs. However, the rest 54% of the remaining units might vanish as it the construction may not be complete.

 

There are only 14 residential projects out of 2,553 projects (0.5%) that failed due to the project collapsed, stopped selling, or paused for new development approaches. It indicates that the market trends are not as bad as many people worry. These 14 failed projects consisted of 1,992 units with a market value of 10,216 million Baht which is small compared to hundreds of failed projects during the economic crisis in 1997 – 2001.

         

The average residential unit price does not drop as much as people presumed. Only 7% of 2,553 residential projects reduce the property prices. While 6% of the residential projects increased the property price and 87% of the projects price remain steady. The average property price only reduces by 0.13% during the first half of 2021, from December 2020 to June 2021. As many developers promoted their properties at 10-30% higher than the original price then give sale promotions which lower the price by 10-30% so there is rarely any price reduction.

 

However, the average housing price of the remaining units in the real estate developers' stock reduced around 7% in 2020, as developers give promotions to attract more home buyers. On the other hand, the property price in the USA grew 15% while the number of Covid-19 infections increased approximately 10% over the past year.

 

In terms of old housing properties that are 20 years old, the market price of low-price condominiums which are lower than 1 million Baht per unit, constantly dropped due to lack of maintenance. On the other hand, the market price of high-price condominiums which are higher than 10 million Baht per unit, do not drop due to good maintenance and community. However, the market price of townhouses and detached houses which are 20 years old dropped due to a building depreciation that needs a renovation.

 

          The average price of newly launched residential projects within the last 3 years, grew approximately 3-5% per year. However, under the current economic situation, the property price remains steady or 0% growth. Due to the high supply of remaining residential properties, especially condominiums, and it is currently hard to find renters. Although some residential properties have a guaranteed rental yield rate of 5-7% per year, the property price dropped by 10-15% after the guaranteed period. As developers included the rental income within the property price, the selling price was higher than the average market price from the beginning.

 

During the Q1-Q2 2021, the residential market in BMR which shares approximately 60% of the country, is still healthy. The 226,645 remaining units in Q4 2020 were absorbed to 213,728 remaining units in Q2 2021. Besides, it is expected to drop to less than 200,000 units by Q4 2021 which is a good sign. If the number of remaining units grows, it will need more time for the market to absorb all the supplies.

 

However, the real estate market in Q3 2021 tends to drop, due to the severe Covid-19 pandemic situation in Thailand. Work-From-Home (WFH) trends make it harder for homebuyers to visit residential projects. While online home shopping can help to aid the situation, it cannot replace the real experience of visiting the site. Nonetheless, the market might make a comeback by Q4 2021, when the Covid-19 situation is better. After all, if the situation remains critical due to a lack of vaccines, the real estate markets might drop.

Note:

This article was translated in English by Miss Namthip Pornchokchai, Managing Director, www.feasyonline.com