History of condominium development in Thailand
By Jon Fernquest |
Today's Bangok Post has a mini-history of condominiums in Thailand.
Condos have not been around that long.
The first condominium was only built in 1981. Condo construction didn't really take off until the early 1990s.
After the speculative boom in condos ended in 1997, it took several years for the industry to recover.
One fundamental difference nowadays is that a lot of people purchase condos to live in, not just for speculation.
Here is the article in full:
BY Invitation
Behind the shift in the condo market
ALIWASSA PATHNADABUTRMonday June 23, 2008
The condominium market in Thailand has changed significantly since its inception. Following the speculative boom of the late 1980s and early 1990s, the new wave of development that began in the early 2000s is of a much better quality and focused on end-user needs. A number of landmark developments have been built over the past two decades, and land prices are now heavily influenced by the mass-transit lines.
The first condominium law was enacted in 1979, and Siam Penthouse, completed in 1981, was the first condominium in Thailand. During this period, most units were sold on a bare-shell basis, without interior decoration or kitchens. Post-tension construction was primarily used, resulting in low ceiling heights (below 2.5 metres), and some units even had columns in the middle of the room.
In the early to mid-1990s, Thailand became one of the world's fastest growing economies (part of what was dubbed the Asian Miracle). Foreign ownership of condominiums was approved in 1992, adding to the growing demand. Seemingly overnight, we saw rapid change that increased the income and confidence of local developers. We now know that this rapid development and financial risk-taking led to over-expansion and speculation in property by developers and purchasers.
In 1995, we began to notice signs of oversupply, and sales rates slowed in many projects. This climaxed in 1997 when the Asian financial crisis engulfed the region and financing of many projects stopped abruptly. At end-1999, CBRE Research Services found approximately 40 condo projects suspended. Only 25 projects were completed between 1998 and 2002.
The condo market suffered from stagnation, weak demand and limited transactions. More than 40% of downtown condominium units were vacant in 1998, and developers were forced to clear unsold inventory at discounted prices. In 1999, Raimon Land sold 100 units in Raintree Villa as part of its debt restructuring, while other developers sold units through auctions, often at discounts of more than 30%. However, in some quality projects in prime locations, such as Somkid Gardens, there were resales of units at 85-90% of the original value.
In the early 1990s, most Thai buyers were speculators hoping to resell at a profit before completion. In the early 2000s, we saw a significant change with Thai buyers purchasing to occupy because of convenience and location. Rising oil prices, which make commuting more expensive, and the convenience of the BTS and MRT, contributed to this trend. Many projects with more affordable units emerged along mass-transit lines in the midtown area.
Renewed demand for condominiums was fuelled by stronger purchasing power and pent-up demand. Developers began to build anew and also restarted some suspended developments. In early 2001, L.P.N. launched Lumpini Place Sathorn, a mid-range development, while we consider the launch of Hampton Thonglor 10 by Major Development as the return of demand for the luxury segment. By the end of 2004, approximately 50 projects with 6,500 units had been launched in the downtown area.
One significant development was the emergence of units designed specifically for the growing middle class, which meant a greater variety of designs, sizes and price ranges than before. The quality and sophistication of units improved, with many projects offering fully fitted units. More buyers began to buy condos as end-users during this period.
You may see that luxury developments now provide higher quality and more extensive features, both within and without the unit. Location has become critical to success, with an emphasis on proximity to mass-transit lines. Condominiums have shifted from commodity products to a reflection of image and lifestyle, and some projects are now being integrated with branded hotels.
Foreign purchasers have increased despite restrictions such as the 49% limit on foreign ownership and the requirement to bring in funds from overseas. Many foreigners are buying with the intention of living in the property for at least part of the year because Bangkok offers a high standard of living at a much lower cost than other European and Asian capitals.
As Bangkok's population increases, I believe condominiums will continue to grow in popularity. CBD land is already scarce and high-rises provide more efficient land use and lower costs per square metre. We foresee the refurbishment of older buildings as prices in many are below replacement costs and already have maximised plot ratios.
The mass-transit lines have anchored the city centre. Outside the CBD, developments will be clustered around mass-transit stations. Prices will increase along with construction costs, higher quality standards and better offerings, but Bangkok should remain competitively priced when compared to regional metropolitan areas.
Many people have asked me how the current situation compares to that of a decade ago, and I believe there are considerable differences. Before the crisis, we saw a slowdown in both sales and prices; however, we are now still seeing price increases in most segments, including resales of existing projects.
Many buyers now purchase condominiums as a long-term investment, and speculation is much more limited. Additionally, debt levels have been well managed at most projects, so I don't think there is any need to panic yet.
Aliwassa Pathnadabutr is managing director of CB Richard Ellis. This article is the first of a weekly series examining the evolution of the Thai property market to mark the 20th anniversary of CBRE in Thailand. For more information, please visit http://www.cbre.co.th.
(Source: Bangkok Post, business, 23-06-08, page B10, temp-link)
Vocabulary:
a speculative boom - when prices rise fast, so everyone gambles that they will rise even higher, there is a lot of buying and selling, a lot of income generated and economic activity, and people are prosperour (until the end of the boom, boom and bust)
have not been around - have not existed
take off - be done in large numbers, become popular
the inception of X - the beginning of X
a new wave of development - a time period when there is, again, a lot of building
focused on - dealing with one topic, rather than many topics (in writing, thought, analysis, discussion, work, etc)
focused on end-user needs - thinking only about the needs of the customers (who will buy and use the condo, not a lot of other irrelevant things)
landmark developments - important developments, that mark important change
X influenced by Y - situation or behaviour X affected by Y
heavily influenced by - situation or behaviour X affected a lot by Y
mass-transit lines - transportation that many people use at the same time, such as subways and skytrains (light rail), buses sometimes also included
a shell - the outside of a structure or object (for example, an egg shell)
a bare shell - a shell without anything inside
sold on a bare-shell basis - sold an empty condo, without interior decoration or furnishings
post-tension construction - a type of condominium construction (See technical explanation)
seemingly overnight - very quickly (you wake up one day and everything has changed)
engulfed the region - every place in the region was affected by it
stopped abruptly - stopped suddenly
stagnation - going slowly with little activity
limited transactions - not many people buying and selling
speculators - buyers who buy because they expect to make a profit by selling after the price increases
purchasing to occupy - buy the condo to live in (not just to profit from rising prices)
a convenience - something that is easy to use, an easy way to do something (See glossary)
contributed to this trend - one thing among many causing the trend
demand fuelled by stronger purchasing power - people buy more things because they have more money
pent-up demand - many people want to buy it, but can't because of very low supply
a significant development - an important event (and change in the current situation)
emergence of - the process or event of coming into existence of something
sophistication - being more advanced and complex than others
proximity to mass-transit lines - near to the subway and skytrain
a reflection of X - caused by situation X and reveals and shows something about situation X
an image of Y - that way that Y appears in the minds of other people (for example, this scandal will really ruin your image)
a lifestyle - the daily living conditions, habits, and behaviour of a person or group of people (for example, in yuppy lifestyle expensive possessions are important)
reflection of image and lifestyle - shows something about the image and lifestyle of a group of people
buying with the intention of living in the property - buy condo because you want to live in it (same as "purchasing to occupy" above)
scarce - not enough (See glossary)
efficient - wasting as little time, energy and resources in doing a task (minimize time, energy and resources in performing a task)
more efficient land use - more people can carry on more activities in a smaller space
foresee - expect a future event or situation to happen
refurbishment - improving a building or room and making it more attractive by cleaning and decorating it, and providing it with new equipment and facilities
a plot - a small piece of land that has been measured and marked out (here for a condo)
ratio - the relation of two groups of things expressed in numbers (for example, the ratio of girls to boys in the class was three to one, 3:1)
plot ratios - the ratio of the length to the width of a plot of land
maximised plot ratios - plot ratios made as large as possible
anchored the city centre - made the centre of the city fixed (so it will no longer change as it used to in the past)
clustered around mass-transit stations - many located around subway and skytrain stations
metropolitan areas - the area around a large city
segments, market segments - a smaller market with specialised needs within a larger market (See glossary)
panic - a sudden strong feeling of fear and confusion (See glossary)
