Property sellers stress mass transit convenience
Developers hope new mass transit lines will revive market but household debt, mortgage rejection continue to worry.
Developers have pinned their hopes on the new mass transit lines to boost the property market, as a weak economy, high household debt and banks’ stricter mortgage rules are expected to continue in 2017.
According to Tritecha Tangmatitham, managing director of SET-listed developer Supalai Plc, the overall economy this year is unlikely to be any different from 2016, but the condo market is expected to improve, driven by the new mass transit lines.
“At the time when overall sentiment is poor, almost all condo buyers are delaying their buying decision and waiting until completion of the project,” he says. “As soon as the mass transit lines start construction, they will immediately resume buying as they’ve realised that land costs will rise and condo prices will increase as well.”
Supalai has some land plots near the new mass transit lines and is waiting until the construction plan is clearer before launching condo projects in those locations.
Mr Tritecha says banks’ mortgage rejection remains a key area of concern, as their lending rules are likely to be even more stringent when considering the loan applicant’s qualifications.
Srettha Thavisin, president of SET-listed developer Sansiri Plc, says the overall property market in 2017 is expected to grow by 4-5%.
“High household debt will remain a major concern. It affects homebuyers’ capability to get a mortgage. This factor will carry over this year,” he says.
However, the expansion of the mass transit lines will open up new locations and opportunities for developers as the lines will run to many more areas in outer Bangkok.
“This will be a chance for the company and our joint-venture partner BTS Group Holdings to build low-rise developments, not just condos as we’ve done in the past few years,” he adds.
BTS has also raised the investment budget for land for the joint-venture development from 10 billion baht to 30 billion after it won the bids for the Pink and Yellow lines late last year via BSR Joint Venture, a venture with Sino-Thai Engineering and Construction Plc (STEC) and Ratchaburi Electricity Generating Holding Plc (Ratch).
BTS holds 75% of the consortium, while STEC holds 15% and Ratch owns 10%.
The 34.5-kilometre Pink Line, estimated to cost 53.5 billion baht, will stretch from Nonthaburi’s Khae Rai district to Bangkok’s Min Buri district, while the 30.4km Yellow Line, valued at 51.9 billion baht, will link Bangkok’s Lat Phrao district and Samut Prakan’s Samrong district. Both are monorail projects, with construction due to start this year.
Both mass transit lines will be implemented under the public-private partnership model, in which the Mass Rapid Transit Authority, the concession owner, will cover land expropriation costs and BSR will be responsible for civil engineering, mechanical and power systems, train operation, maintenance and fare collection.
“Attractive locations where we’re eyeing to buy new plots of land will be those located near the Pink and Yellow lines,” says BTS chairman Keeree Kanjanapas. “Buying plots near the mass transit lines where construction plans are certain is worth the investment.”
Pink and Yellow lines
Many developers say choice locations will be along the new mass transit lines including the Pink and Yellow lines, whose construction plans are clearer now that they have secured the winning bidders.
Mr Tritecha says hot locations this year will cling to the Pink, Yellow and Orange lines, including Sri Nakharin, Rama IX, Ramkhamhaeng and Chaeng Wattana near the government complex.
Other target sites will be those on newly cut roads like Phahon Yothin soi 50 and locations near new entrances and exits of expressways like Phutthamonthon Sai 1.
“The Purple Line is still oversupplied. Some large developers have land plots on hand in those locations but are still waiting for the existing supply to be absorbed before deciding to launch a project.”
Nalinrat Chareonsuphong, managing director of property consultant Nexus Property Marketing Co, says the inner city will continue to draw developers this year due to strong demand from high-end buyers and scarce plots of land. Due to rising land costs, average condo price of new projects in the inner city area will see the highest rise 9% to 205,283 baht per square metre in 2017 from an average 188,333 baht in 2016.
On Chidlom, Phloenchit and Wireless roads, at least three new high-priced condo projects will be launched this year, including 28 Chidlom by SC Asset Corporation Plc, Life One Wireless by AP Thailand Plc and Bangkok Sky by new players, the Prasarttong-Osoth family. All will have a starting price of 300,000 baht per sq m.
Other prime zones for high-priced condos where new projects will be launched this year include Thong Lor and Sukhumvit sois 39 to 49, lower Phahon Yothin, the riverside area and Phaya Thai, she adds.
According to property consultant Colliers International Thailand, the top five locations that will be more attractive this year are Rama IX, Ramkhamhaeng, along the Blue Line, the inner city and along Phahon Yothin Road.
On Rama IX Road where some parts of the Orange Line will pass, there will be more condo projects being launched in 2017. Land prices during the year rose by 10% to 300,000-400,000 baht per square wah because of its proximity to the inner city.
The Orange Line has also stirred interest in locations on Ramkhamhaeng Road as there are still sufficient land plots on the main road and sois for new development.
Colliers says there will be many condo projects planned for launching along Charan Sanit Wong Road and Phetchakasem Road where the Blue Line will start running through in 2020.
Inner city locations on Silom, Sathon, Rama IV and Sukhumvit roads still attract high-priced projects while asking prices for land on Sukhumvit Road and Thong Lor have soared to 1.5 million baht per sq w.
Phahon Yothin Road will be another attractive area, including locations from Victory Monument to Lat Phrao intersection where the BTS currently runs and those from Central Lat Phrao to Saphan Mai where a BTS extension line is being constructed.
Mrs Nalinrat at Nexus says real estate will continue to attract investment-oriented buyers. If stock market growth is not strong enough this year, some investors will shift their investment portfolio to real estate.
“Many listed developers have investment buyers in their customer base. When they launch a condo project, these investors will buy a unit to rent out or resell. This outlook will continue this year,” she says.
Investment buyers are not only local but also foreigners. Sansiri has seen rising demand for Bangkok condos among buyers from Hong Kong, Singapore and Taiwan after it marketed in these destinations in the past few years.
“These buyers have high purchasing power and are looking for an investment in projects near a mass transit line as it is convenient,” Mr Srettha says. “Property prices here are also lower than their market.”
Sansiri plans to do aggressive marketing in the first quarter to build brand awareness among foreign buyers. It aims for sales from foreign buyers to hit 8 billion baht in 2017 after recording 5.3 billion baht in 2016.
While Pruksa Real Estate Plc is studying the hospital business, Ananda Development Plc is also this year looking to develop a mixed-use project comprising retail, residential units or hotels with an investment of 2.6 billion baht on Ratchadaphisek Road.
“The new business will create recurring income,” says John Millar, Ananda’s chief strategic development officer. “Our Japanese partner Mitsui Fudosan says no property company survive in the long term unless it has a good recurring income.”
Origin Property Plc will start construction of a mixed-use project, Origin District, in mid-2017. The 4-billion-baht project will comprise 1,332 condo units in a high-rise tower and four low-rise buildings worth a combined 2.33 billion baht.
There will also be three buildings of community mall with a lettable area of 3,000 sq m worth 200 million baht and 330 units of a hotel and serviced apartments worth 1.5 billion baht.
“The project will finish 2019 and will be our first project to generate a recurring income of around 100 million baht per year,” says Origin chief executive Peerapong Jaroon-ek.