Hello. I have been working as a real estate agent in Bangkok since 2006. In that time I have seen some changes, but surprisingly little has changed. Let me explain.
Apartment rental prices Bangkok 2008 – 2018
Rental prices for most apartment buildings have increased very marginally in the last 10 years. While a spacious 3-bedroom apartment in the Sukhumvit area would have cost 70,000 baht 10 years ago, today it can cost you 85,000 baht. That’s only a 20% increase over 10 years, actually much less than inflation, and in many ways an apartment is cheaper now than it was 10 years ago.
Why? It’s hard to say, but I’m guessing ongoing political problems, 2 coups, and a pretty stagnant economy barely reaching around 3% GDP growth each year are the reasons. This level of growth may be acceptable for a leading developed nation in the world, but for Thailand, which (let’s face it) still has some way to go in terms of development, it’s not very good.
The apartment rental market in Bangkok is mainly governed by expats. Thais don’t rent at these prices, or they don’t earn enough, or they are sensible enough to buy property in the suburbs, or they are part of the immensely wealthy elite and already own several blocks in central Bangkok. As the number of expats has remained fairly constant, so have rental prices.
Newly constructed condominium buildings have seen rent prices rise, and there will always be a small percentage of people who have enough budget and just want to live somewhere very new, something that is particularly true for Japanese renters, but new buildings will become old. and once they have been built and a rental price has been established, you will notice that the price will remain relatively stagnant from that point on.
This is really the same with condos for sale. Once a building has finished construction, a sale price and a rental price are set, and it will remain stuck at this level for years to come.
But prices have been rising in Bangkok, everyone knows that! So am I wrong?
Sale prices of condominiums Bangkok 2008 – 2018
I don’t think I’m wrong. There are some condominium buildings that have experienced a very good level of capital appreciation in recent years, but “on average” they haven’t.
Yes, prices have increased significantly in Bangkok, and this is something that all developers will be happy to promote to you when they sell you their new project. They will show you charts with an upward trend in prices and show you that prices are increasing by at least 5-10% year over year.
Prices for new buildings have risen 5-10% year over year, but not completed buildings.
This is mainly due to increases in land prices. As land prices (and, to some extent, construction costs) rise, so do the costs of new buildings. So new buildings get more and more expensive, but do completed buildings follow suit?
No. And that’s why I’m not wrong. A building that costs 150,000 baht/m2. 5 years ago, now it may only be 160,000 baht per square meter In this example, about 1.5% compound growth. This building was new 5 years ago, and a new building that is still under construction might cost you 200,000 baht/m2. which is 33% more than the new building was 5 years ago, hence the compound growth of 5%++.
But the fact is that the building YOU bought 5 years ago may have only increased by 1.5% compounded per year.
This is the current trend with Bangkok property. New buildings constantly set new price benchmarks and then stay the same. With even newer buildings adding a layer on top, setting new landmarks, then staying on the same level. Even the newer buildings still, just keep adding another layer on top.
This is why you will find such a large price discrepancy between buildings, even if they are located next to each other. An example would be Lumpini 24, a new condo located on Sukhumvit Soi 24, where prices will be around 250,000 baht/m2. Therefore, a small 2-bedroom unit of 60 square meters will cost around 15,000,000 baht.
Immediately next door is an older condominium called President Park, where prices have been stuck at around 60,000 baht/m2. So a very spacious 3-bedroom unit of 260 square meters will set you back around 15,000,000 baht.
Four times larger, located immediately next door, but at the same price! So the old adage “Location, location, location” doesn’t apply here. It is ONLY based on the age of the building.
Here is an example of a newer building for sale, 275 m2. asking for 80,000,000 baht: http://www.property-bangkok.com/viewproperty.asp?id=587
This is an example of an older building for sale in a similar location, 366 m2. asking 21,000,000 Baht: http://www.bangkokcondo.org/viewproperty.asp?id=614
Yes, the new condo is much nicer, better designed with a newer lobby and gleaming fixtures. But is the variation in price fully justified? I mean, 4 times the price!
Keeping in mind that the interior of the new condo will age and need to be replaced, and if you bought in the older building, you can renovate the interior to have it brand new.
In any case, whether you’re buying into the new condo or the older building, the main issue raised in this article is that prices for new projects may have increased considerably, but once you’ve invested in your unit of condominium, you may not reach the same level of growth that the developer indicated.
The only ones who really see a lot of capital growth are the owners of the land. And these are mostly Thais who are already very wealthy, since non-Thais cannot own land. It doesn’t help most Thais who are not rich and still have financial problems.
Office rental prices have also remained fairly static. In the last 10 years, office rental prices have increased marginally, similar to apartment buildings. However, as most investors (both Thai and foreign) seem obsessed with condominium buildings, the price of office space for sale has also remained fairly static, and office units for sale arguably provide the best option for rental profitability, since office leases are normally a minimum of 3 years, and you do not need to renovate the office space as you would with a condo, since the former requires a coat of white paint, the latter new furniture, new bathrooms, new kitchen, etc.
This is not to say that it is a bad idea to invest in real estate in Bangkok. But you have to consider office space and commercial properties in addition to residential and you have to look very carefully at the building, as I mentioned earlier some condominium buildings have seen good growth in the last 10 years while most have not .
You have to have a good eye. Best of luck!