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News Release


The song remains the same for Bangkok’s property market in 2017

Strong fundamentals, but risks remain

​​​​​​​​Bangkok's real estate market performed well in most areas in 2016. The city's commercial sectors reported strong occupancy and rising rents, supported in large part by a healthy balance between demand and supply. On the other hand, while Bangkok's luxury condominium market continued to grow, mass market segments are saturated, with demand withering and prices stagnating. These trends are expected to continue into 2017, according to JLL, a professional services firm specializing in real estate.

Suphin Mechuchep, Managing Director of JLL, says "We are entering 2017 with new challenges and opportunities for the Bangkok real estate market. There are a number of factors that may both positively and negatively affect real estate such as the government's push for infrastructure projects, the introduction of the land and building tax, continued rise in land prices, and global political and economic uncertainty."

"Despite these factors we do not expect fundamentals in most of Bangkok's property sectors in 2017 to change significantly from 2016. Buoyant demand and limited supply will continue to support growth in the city's commercial sectors while the condominium sector is likely to continue to face headwinds," she says.

The office train keeps rolling

Bangkok's office market has been a consistent bright spot for several years, with vacancy rates across the market now at or near all-time low levels. Driven by healthy demand, particularly for space in newly-completed projects, average gross rents are also at or near all-time highs. A handful of leading buildings such as Park Ventures Ecoplex, are now achieving monthly rentals per sqm on new leases at above THB 1,000.

After 12 consecutive quarters of decelerating rental growth, we expect that 2017 will see rental growth accelerate as there are only a handful of new projects in the supply pipeline scheduled to complete that are not already fully pre-leased (or nearly so).

Good times, bad times ahead for the condo market?

Mass market condo segments with prices of THB 100,000 per sqm or less are reaching the point of saturation. The vast majority of these units are in projects located in fringe locations.

In an effort to hedge against faltering demand in mass market segments, many developers such as Sansiri, LPN, Ananda, and SC Asset are increasingly moving up-market and launching new projects priced at or near the very top of the market. Typically located in desirable areas like Thong Lor, Phrom Phong, and Chidlom, average selling prices in projects at the top end of the market have continuously recorded double-digit year-on-year growth since mid-2015, with prices now regularly eclipsing the THB 300,000 sqm mark.

However, by the end of 2017, JLL expects the amount of completed units at the top end of the market to grow to 1,430, almost doubling the end-2016 figure and to increase by more than five times over the next four years. Therefore, whether or not there is enough demand to keep the strong momentum going in the long-term remains to be seen.

Infrastructure investment will continue to shape the market

Late in 2016, winning bidders were announced for three new mass transit lines serving suburban areas -- MRT Pink line, MRT Yellow line and MRT Orange line. Construction is expected to start on all three lines by mid-2017. Looking back at the construction of the MRT Purple and Blue lines and extensions to the BTS network, we expect developers to quickly being securing land for future residential development once shovels are in the ground. However, given the saturated state of mass market segments, the volume of new projects launched in 2017 are likely to be limited.

"Many property developers have learned lessons in overbuilding too early along new transit lines," says Mrs. Suphin. "Though close proximity to transit is a key selling point, developers must continue to be sensitive to market demand, particularly the distance from the city's centre and other employment locations as well as suitable amenities and appropriate pricing."

As prime land is scarce, leasehold is the new freehold

"Historically speaking, real estate developers and investors have exhibited a strong preference for freehold land, particularly in the residential sector. As available prime freehold land is scarce, developers are increasingly seeking out prime leasehold development sites," says Mrs. Suphin

JLL has recently disposed of two large land plots in the heart of Bangkok's central business district on a long-lease basis on behalf of the landlords through a tender process, achieving strong levels of bids.

In addition, since news of the new land and buildings tax scheme was announced, some property owners, particularly those with well-located, high-value underutilized land, are seeking strategies to minimize the prospective burdens of the new tax, which is expected to become effective in 2018.  Long term leasing has appeared to be a preferred strategy for these owners as they do not want to sell their land assets. This should reinforce the trend of developers securing prime leasehold development sites.

Rising land prices will continue to be a big challenge for realtors

Among several challenges, a rapid growth in land prices represents one of the biggest concerns among property players. JLL estimates that the average land price in Bangkok has grown by 5-10% per year over the last several years and is expecting it to rise further.​

"Despite continued rise in land prices, property development companies will have no choice but continue to develop new projects. The success of those projects will rely large on the developers' ability to manage the total development cost while simultaneously achieving competitive pricing and acceptable returns," says Mrs. Suphin.