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Bangkok

Supply Shortage Provides Opportunities for More Purpose-built Rental Housing Developments for Expats in Bangkok


As central Bangkok experiences a severe shortage of purpose-built rental houses that cater to expatriates, developing small-scale rental housing compounds is fast becoming an interesting investment option, according to real estate professional services firm Jones Lang LaSalle.
 
“Supply of purpose-built rental houses in central Bangkok has been insufficient to accommodate the strong demand from expatriates, particularly those looking for a residence in an exclusive housing compound,” says Ms. Daonum Lilavivat, Head of Residential Agency at Jones Lang LaSalle.
 
Jones Lang LaSalle continually receives inquiries from expats living in Bangkok seeking rental houses in central locations. These inquiries are mainly for accommodation in small housing compounds with six to seven units, each with 400–500 sqm of usable space, good security, estate management, house maintenance service, gardening, and swimming pool maintenance.
 
“We have been appointed to let houses in a number of rental housing compounds. These houses fetch monthly rentals ranging between THB 180,000 and THB 300,000, depending on the location, house and land sizes, furnishings, and provision of a private garden and a swimming pool. These compounds are leasing out very well. In fact, demand for this type of houses outstrips the available supply in the leasing market,” comments Ms. Daonum.
 
The difference between the monthly rental rates per sqm of rental houses and those for luxury apartments or condominiums may be minimal. Ms. Daonum explains that most expatriates who opt to rent houses are those with a family and prefer a residence that provides exclusivity, are set in a natural environment, allows pets, and offers a private garden with an area for outdoor socializing.
 
Stand-alone detached houses are less popular among expats as the concerns over security are higher. In addition, some houses in larger housing estates are offered for rent by the individual house owners. These units, if well located, designed, and furnished, can attract some expats. However, when compared to purpose-built rental houses in small compounds, others may find houses in larger estates less attractive as they are less exclusive and tend to lack a single estate manager.
 
"Given the lack of supply, developing a small housing compound in central Bangkok to accommodate expats may be an interesting investment option, particularly for those who already own land, which they do not want to sell or lease on a long-term basis,” remarks Ms. Daonum.
 
“The development process is relatively straightforward. This type of housing compound can be developed on land plots starting in size as small as 300 sq.wah. Discounting the value of the land, developing this type of housing compound requires a low investment and short construction time relative to apartments or other high density accommodation . Operating is less complex and payback can be reached more quickly. In addition, maintenance and renovation are less costly and easier to undertake. There are cases in which houses more than 20 years old are still leasing quickly as they were well built and have been well maintained,” she says.
 
Ms. Daonum also says that purpose-built rental houses typically generate stable income streams as the minimum lease term is usually two years as compared to one-year term for condominiums or apartments.
 
However, investors looking to develop purpose-built rental houses must have a clear understanding of the profiles, requirements and preferences of their target tenants such as sizing, location, designs of the compound and houses, and the minimum facilities and services to be provided.