Bangkok’s skyline has changed dramatically over the two past decades, thanks to the boom in condominiums.
But did you know, there are more than 100,000 vacant condos in Bangkok
With the COVID-19 crisis perhaps turning into an economic crisis, we may finally see real estate prices drop in a big way.
Get up to a 50% discount
Bangkok today has more than 100,000 empty condos and this number is expected to grow by another 8,000 before the year ends. Many listed developers already announced that they are going to shift focus from developing new projects to clearing existing inventory.
But to clear inventory during this time is easier said than done.
The COVID-19 crisis made it almost impossible for foreign buyers to make a purchase decision, as they can’t even enter the country. Even for locals, viewing a property now is much tougher.
Many completed projects with residents already moved in are uncomfortable with strange faces entering their properties. Many sales galleries and mock-up units have to close temporarily as the number of walk-in viewings is reduced dramatically.
The only way for developers to move their inventory is to slash prices.
Just last week, one developer announced a reduction in price of up to 50% for certain units across all their projects. Another developer reportedly slashed the average price of its flagship project in Thonglor area down from 325,000 baht per square meter to 185,000 baht.
And yes, these units are starting to move very quickly.
It’s not just because of COVID-19
COVID-19 is merely the latest in a string of bad news for the real estate sector.
The Bangkok condo boom started in the early 2000s due to rising demand from the growing middle class. The boom also saw flipping condos as a lucrative business for speculators.
That was until 2016 when many speculators failed to resell their investments. Part of the problem was that there was so much supply in areas that really didn’t need condos.
Condo projects along the MRT Purple Line were a good example.
As pillars for the new MRT line started popping up, developers rushed in to buy cheap land. They expected these “0 meter from the station” to sell out in a matter of days. Using the same playbook as the developers, speculators invested a lot of money in these projects.
They were wrong.
A few hundred meters away from these condos, a buyer can find a townhome with six times the usable space for the same price tag. Furthermore, the area where the Purple Line runs doesn’t really offer the convenience of being in the city center. Yes, residents of these condos may be zero meter away from a train station. But they would still have to spend up to an hour commuting to and from Bangkok CBD twice daily.
Condo buyers were also becoming more sophisticated. They have learned that not all developers and brands are the same. By the end of 2016, we could say, gone were the days a condo in a great location means an automatic sell.
All it takes is a little patience.
Early last year, the Bank of Thailand introduced a macro-prudential or “cooling” measure to make sure that the Thai property sector won’t crash like it did in 1997. This measure reduced the loan-to-value (LTV) of second (and subsequent) mortgages by up to 30%.
Although it didn’t affect first-time buyers, this cooling measure (now relaxed) worked so well it froze the market entirely. High-rise developers were more severely affected as the second mortgage for most people is for their condos. Title deed transfers for condos in 2019 fell by 11.6%, one of the largest drops on a year-on-year basis.
This policy coincided with a weakened economy and an absurdly strong baht. Thailand saw an economic growth of only 2.4%, which was the lowest in five years. The currency was so strong that properties purchased by foreigners effectively ended up being 10% more expensive at the time of transfer.
Hence in 2019, we started to see property developers slashing prices that oftentimes left buyers who bought “too early” at a higher price a little upset.
But in 2020, if you are looking to purchase a condo in Bangkok, this could be your year. Just remember to take some time to compare a few similar projects.
Always ask for a further discount, and most importantly: be patient.