The report offers an insider perspective from a leading developer on real versus speculative demand in the condominium sector, which segments may have been underserved during the sector’s rapid expansion in recent years, and expectations for the evolution of the condo market going forward.

In Bangkok, condominium demand remains strong; however, with developers in recent years rushing to deliver one-bedroom units along mass transit lines, other product types have been left potentially undersupplied. In particular Raimon Land has observed a strong reduction in vacant supply of larger, family-size units in recent months. Going forward this may mean a rise in the number of larger or alternative unit configurations.

Raimon Land’s report indicates that throughout the past 12 months, a total of 30 projects comprising 14,059 units were completed in the capital, most of which were one-bedroom units in midtown areas. Over the next 2 to 3 years, more than 24,000 units are expected to be completed in these midtown areas, such as Rama 9, Ratchada, Lat Phrao, Paholyothin, and the Silom and Sukhumvit BTS Line Extensions. In downtown areas, 11,500 units are expected to be completed.

Pricing continues to rise, with 60% of new launches now asking prices above 100,000 baht per square metre and 5% asking above the 200,000 baht per square metre mark. Take-up rates are healthy across all segments, selling out 74% of new launched units on average. The price increase, however, is putting pressure on rental yields, which are ranging from 4 to 7% for new completed projects.

“At the moment we clearly see two parallel trends in the Bangkok market,” said Simon Dervillé, Raimon Land Deputy Vice President for Business Development. “In downtown areas, we still see high potential for projects in the high-end luxury segment, where demand for large-size units remains strong from both local and foreign buyers. And in midtown areas, we will continue to see more projects provided that banks continue to support both developers and homebuyers, which they have done a good job of so far.”
In Pattaya meanwhile, luxury beachfront projects are no longer the exclusive attraction in the market, as new downtown developments are now steadily being launched in Central and South Pattaya, emphasizing the urban lifestyle and proximity to other amenities. Beachfront projects are continuing to attract customers in the high-end segment, but supply is increasingly limited by the lack of available land.

To emphasize the point, in the past 12 months, four projects with a combined 1,008 units were launched in North Pattaya. Of those, just one – Baan Plai Haad, which features 353 units – was classed as beachfront. Selling prices at Baan Plai Haad are about 100,000 baht per square metre. A year earlier, the luxury condominium project Zire Wongamat, which comprises 450 units, was also launched along Wongamat beach, and is now selling between 125,000 to 150,000 per sq m.

So while beachfront locations, such as those at Wongamat and Naklua in the North, are the most sought after, Pattaya has also been keen to develop other areas of the city.

As a result, there are now several high-quality developments close to the city’s non-seafront attractions, such as shopping centres, which offer easy access to the city centre. Other projects set back from the coast have sought to establish their own unique selling points. The Golden Tulip Hotel & Residence Pattaya, by Tulip Group Thailand, for instance, offers buyers a hotel-quality management service, while Savanna Sands by Universal Group is hoping to attract premium clients with its resort-style design.

The report says developers are also responding to the growing demand from Thai buyers for getaway properties. A total of 13,152 units were completed within the past 12 months, with an impressive take-up rate of 87%. The majority of those units were in projects located in Central and South Pattaya.

With 9.2 million visitors expected in 2013, tourism remains an important driver of Pattaya’s property market, with increased visitor arrivals and customers from Russia, Japan, and China. Unlike previous years, when foreign buyers were primarily looking for larger units, recent condominium buyers from these countries have been more interested in vacation homes, priced below 5 million baht, where they stay for shorter periods.

Based on Raimon Land sales in Pattaya, domestic buyers still dominate the market in terms of nationality but constitute a smaller percentage overall compared with 2011. The Russian market is still strong with a growing number of Asian buyers, notably Chinese and Japanese nationals. Indeed, Asian buyers are expected to continue forming a bigger portion of the condominium market in the future.

Market-wide in Pattaya, the average selling price is now at 71,357 baht per square metre, an increase of 21.2% year-on-year. This is due to the escalating cost of land, which has typically led developers to opt for high-rise over low-rise developments. Within the next three years, nearly 25,000 units are expected to be completed in Pattaya, a large percentage of which will be one-bedroom units measuring less than 40 square metres.

“My concern is that today only 48% of the newly launched units have actually been sold,” commented Mr. Dervillé. “The good thing is that the demand is there, but the challenge is that there are too many projects in the pipeline.”

Major developers in Bangkok have taken note of the evolving market opportunities in Pattaya and are now establishing a presence in the city. This trend may limit the occurrences of projects developed by smaller players that experience financial problems and put their developments on hold indefinitely, which has happened in Pattaya in the past.

“Lately, we have seen a situation in Pattaya where there are many players, too many projects being developed, and not enough construction companies to build them. With the arrival of well-established developers from Bangkok, we will see better quality projects and hope the market will consolidate. There is great potential for the Pattaya real estate market but it needs to be regulated,” added Mr. Dervillé.

Statistics indicate that the Pattaya condominium market is set to continue growing in 2014 and in the years ahead. To prevent the market overheating, the report suggests that developers of low- to mid-segment condos should seek to tighten their buying conditions, perhaps by requiring higher down-payments and booking fees. However, with the average take-up rate around the 50% mark, it concludes that this might not happen just yet.