Failure rate for Bangkok condos nears 50%

BANGKOK (The Nation): The chance of failure for condominium developers in Bangkok has grown to almost 50 per cent as competition heats up amid a glut of fresh supplies, warned Aquarius chief executive Yongyuth Chaipromprasert.

After conducting a study over the past five months, the building consultant said even the inner Sukhumvit area, once deemed immune to downturns, “no longer guarantees success”.

“The average take-up rate for Bangkok condominiums is now 54 per cent,” he said. “That is considerably lower than about 70 per cent for last year.”

“Of the 50,000 units that are expected to be launched this year, about 46 per cent won’t be sold,” he deduced from recent statistics. “One out of every two developments could fail.”

“The inventory left over from last year should also add to current stock, making the situation even tougher for sellers, especially newcomers,” he said.

With 15,000 unsold units from last year and 25,000 units from this year, the market will have an additional 40,000 units to clear in 2009.

Because of the worrying trend, he expected new supplies to fall to 40,000 units next year. Yesterday TCC Land said it was halving the number of new projects from 5 to about 2.

Yongyuth said most of the current buyers are in the outer zones of Bangkok where land is cheaper. “If developers can sell units for 1 or 2 million baht, they should survive. It is the large units which face difficulty with rising inflation and oil prices,” he said.

Supharat Development managing director Sumet Sukapanpotharam agrees. “Even with the government incentives to boost home sales by suspending the sales and purchase tax, the developers who will benefit are those who have completed projects and can transfer the units within the year.”

“We are building for urban workers with limited spending power. There’s no point selling expensive units when purchasing power has fallen,” said Ananda CEO Chanond Ruangkritya.

Ananda’s Ideo Mix near Sukhumvit 103 is commanding sales as the units are priced from 1.5 million baht.

Yongyuth said the worst hit would be developers who bought land recently at high prices and were forced to construct at escalated costs.