The condominium market that began heating up a few years ago is likely to start cooling down and reach a balance point as developers are more cautious about launching new projects when building material costs are volatile. At the same time, prospective buyers of condominiums may hesitate because of concern about higher costs of living and a decrease in their ability to afford new homes.
In fact, higher oil prices had been the factor creating strong demand for the condominium market as people were concerned about travelling expenses. Special interest was shown in those units near mass-transit routes and their planned extension lines.
According to a survey by Agency for Real Estate Affairs (AREA), the average sales rate of condominiums in six major locations _ Ratchada/Lat Phrao/Ratchayothin, Phloen Chit/Sukhumvit/Ekamai, Onnuj/Baring, Silom/Rama III, the western bank of the Chao Phraya River and Bangkok's outskirts _ rose by 40% in 2007 compared to 2006.
However, the average sales rate dropped by 7% in the first quarter of 2008 to 9,247 units from 9,895 in the same period last year.
The only two locations to enjoy an increase in sales were Sukhumvit and the western bank of the Chao Phraya River, up by 33% and 20% respectively.
The highest decrease in sales was in Ratchadaphisek with 46%, followed by Silom/Rama III with 43% and the outskirts by 0.1%, showing a significant downward trend in the condominium market.
Opas Sripayak, managing director of the low-priced condominium leader L.P.N. Development Plc, said the number of new condominiums launched in the first quarter of the year decreased compared to the same period last year.
''Some developers were not confident as volatile prices of steel and rising construction costs pushed unit prices higher while purchasing power was reduced because of inflation,'' he said.
Many developers shifted to develop more low-rise units as supply was limited and they expected single houses and townhouses would be more interesting to homebuyers while tax incentives lasted.
''Everything is becoming more expensive,'' Mr Opas said. ''Low-priced condominiums will be popular during a time of weak purchasing power.''
Teerachon Manomaiphibul, chief operating officer of the listed developer Property Perfect Plc, said higher construction costs were largely being driven by the doubling of steel prices and skyrocketing oil prices since last year.
As a result, construction costs for a condominium building that consumes a lot of steel have risen by at least 30% for construction of less than eight storeys and 35% for more than eight storeys.
Meanwhile, saleable area in a condominium building also has been reduced as stricter rules about environmental concerns require additional utilities in a high-rise residential building.
''Rising construction costs have forced many condominium developers to break their project plans. There will be no more projects at 30,000 to 40,000 baht a square metre,'' Mr Teerachon said. As condominium prices soar, townhouses in the same location might be an alternative.
''Though a condominium project may be sold out, if construction doesn't start or the financial status is not strong, developers may face lower margins and delays in unit transfers,'' he said.
No comments:
Post a Comment