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28 Nov 2017

Real Estate and Construction

Developers Need Caution toward New BKK Homes, 100,000-108,000 Units Expected to Enter the Market in 2018 (Current Issue No. 2883)

As Thai economic recovery momentum is expected to continue in 2018, boosting property developers’ confidence toward the offering of new residential units for sale, the competition in the property market remains high. Also, a growing supply of unsold residential units will pressure property developers, forcing caution in sales targets. KResearch expects that around 100,000-108,000 new residential units will be up for sale in Bangkok metropolis in 2018, rising 0-2 percent from 2017. Developers’ strategy for 2018 will likely focus on investments along mass transit routes. Progress on a number of mass transit projects - e.g., extensions of electric train routes - has opened up new locations for development of new projects, in line with current urbanization.

The strategy of each property developer toward their adjustment varies; each market segment requires a different approach. Developers with land in prime locations, e.g., the city center, or in other business districts, enjoy the option of building their high-end condominium in the format of “Mixed-Use Project” to earn more from business space rentals. Although the targeted consumers of high-end condominiums have high purchasing power, the size of this market segment is rather small. Demand for upscale condos has partially been absorbed, as well. As a result, operators planning to develop high-end condo projects in 2018 should be cautious about their investment plans.

Regarding the mid-range residential projects in 2018, a winning strategy requires the right locations. If not situated adjacent to mass transit routes, they need to be accessible via various types of transport modes. Otherwise, they should be conveniently reachable by public transportation. In addition, the residential units should have functional designs to give the best value for money. Sales strategies for condos could focus on recent graduates who have begun work. Such potential buyers tend to have few debts and want to own their first home.

In low-rise projects, developers may focus on customers expecting an increase in the size of their family, as well as on the working population with higher incomes who are thinking of moving out of small condo to live in a townhouse or a single detached home. Developers might also present designs with flexible functional spaces that low-rise residential units can offer better than condos. For instance, owners can alter floor plans, modify the residence façade, etc.

Meanwhile, the low-end residential market is expected to slow in 2018, prompting developers to ease up on such developments. At the same time, they will have to bolster their marketing campaigns to sell their unsold supplies.

Real Estate and Construction