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In challenging market, Thai developers get creative

Construction cranes along the Bangkok skyline. Narupon Nimpaiboon/Shutterstock

Residential real estate players in Thailand have turned to generous promotions and industry recognition in anticipation of new macroprudential regulations and other market headwinds this year.

With new loan-to-value (LTV) limits set to bite on 1 April, developers have taken to meting out discounts and other buyer-friendly incentives in a cooling prime condominium segment.

“Price discounts that had not been seen in this segment for many years are now offered in some projects, though they are primarily limited to units with inferiorities such as less efficient layout, blocked view or less desirable location within the building,” noted Suphin Mechuchep, managing director of JLL Thailand.

The change in LTV limits, designed to quell search-for-yield behaviour in the residential sector, is likely to increase required downpayments for Thai homes. This is expected to undermine investment demand for unsold studios and one-bedroom condos priced between THB120,000 and 150,000 (USD3,800-4,800) per square metre, research from JLL Thailand showed.

JLL Thailand Managing Director Suphin Mechuchep at Tuesday’s media event in Gaysorn Urban Resort launching this year’s PropertyGuru Thailand Property Awards

“These units have appeared most popular among investors purchasing more than one unit to put up for rent. Though these smaller condo units are priced far below THB10 million, the requirement for higher downpayment will translate to less purchasing power of investors in this segment,” Suphin said.

JLL also expects property players to seek critical acclaim for their projects in an attempt to assuage investors uncertain about exposure to a slowing market. “In the increasingly competitive environment, property developers, owners and investors are looking for ways to enhance the competitiveness for their properties/projects, including industry recognition,” said Suphin, who heads the panel of judges at this year’s PropertyGuru Thailand Property Awards.

Among the expected popular categories this year will be for Best Mixed Use Development, mirroring the growing trend of connected, integrated or multi-component properties particularly in Bangkok’s cosmopolitan areas.

Mixed-use developments bring about land use synergies in Bangkok where fast-appreciating plot prices have pushed up condominium values despite soft market conditions, JLL Thailand noted.

Several condo developers have adapted to the exorbitant land costs by harnessing technological innovations to minimise construction outlay. Others have opted to secure leasehold land for mixed-use and non-residential projects in efforts to manage cash flow and obtain stronger investment returns.

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