Bangkok developers warned over glut of affordable condos and townhouses

Real estate developers in Greater Bangkok should tread carefully when introducing new condos and townhouses priced under 2 million baht (US$58,241) due to a significant backlog of unsold units, warns Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC).

Vichai highlighted that the condo and townhouse market for units priced under 2 million baht (US$58,241) experienced a slowdown in the third quarter due to an uptick in new supply.

“Investing in this segment should be approached with caution as the number of units sold was lower than the number of new units launched.”

He pointed out that another segment causing concern is condos priced between 2 million (US$58,241) and 3 million baht (US$87,390), as the remaining units rose by a significant 20%.

Vichai explained that while there were transactions in these two segments, mainly by individuals intending to live in the properties, a bulk of the buyers were rental investors. Many potential homeowners struggled to secure loans due to lower purchasing power.

“Many projects had a good sales rate in the first phase as the units were snatched quickly by investors. But the unattractive units were left unsold, such as those near garbage rooms or with a poor view.”

Vichai warned that once construction is completed, this unsold inventory could result in substantial holding costs for developers, including common area expenses and property taxes if the units remain unsold for three years or more, reported Bangkok Post.

“To avoid incurring holding costs, developers often provide discounts for these units. For other developers looking at this segment, monitoring the remaining supply is more important than focusing on absorption rates.”

REIC identified the top five risk-prone locations due to the high number of unsold condo units in the third quarter of last year, Huai Khwang-Chatuchak-Din Daeng, Phra Khanong-Bang Na-Suan Luang-Prawet, Thon Buri-Klong San-Bangkok Noi-Bangkok Yai-Bang Phlat, Muang Nonthaburi-Pak Kret, and Lat Phrao-Wang Thonglang-Bang Kapi.

REIC reported a 3.5% year-on-year increase in residential units available for sale in Greater Bangkok to 213,282 units worth 1.11 trillion baht (US$32 billion) in the third quarter. Meanwhile, new supply dropped by 12.2% to 20,281 units worth 143 billion baht (US$4.1 billion). Concurrently, units sold fell by 14.1%, and unsold units increased by 2.6%.

In related news, Thai investors anticipate a surge in depositary receipts popularity in 2024.