Rising Prices in Bangkok Increase Demand for the Suburbs

Property prices in Bangkok are increasing rapidly, and now that the sky-train has been extended to the East and West sides of the city, many foreigners are choosing to escape the city and are looking towards less crowded areas in the suburbs.

Many are choosing to buy middle and lower priced homes outside the city in suburbs such as Thon Buri and Bang Na. The attractions of these two suburbs include the fact that Thon Buri has relatively few high-rise buildings, while in Bang Na there are several good international schools.

The suburbs of Bangkok are undergoing something of a population boom, as the number of residents has increased by more than 30% during the last decade. In spite of this massive increase the population density is still an incredible 800% lower than the inner-city, and according to the National Statistics Office this equates to 1,086 people per square kilometre, compared to 8,780 people per square kilometre.

The top two districts for population expansion are Bang Bua Thong and Bang Yai, where the population increased by 85% and 107% respectively which is largely due to the government’s plan for extending the MRT Purple Line.

It's expected that the property market in Bangkok will continue to remain hot, as the city is likely to become a hub within south-east Asia. The number of foreign tourists visiting the country grew from 15.93 million arrivals in 2010 to 11.17 million during the first six months of this year. This number is expected to increase to over 30 million tourists annually once the Asean Economic Community is formed in 2015.

Thailand's Property Market Finally Slowing Down

According to estate agent Brett Gordon, founder of Panna Capital in Hong Kong, the property market in Thailand is slowing down after a year of spectacular growth.

The Bank of Thailand's Economic Conditions Report released in January showed sales in Bangkok reached 178,128 in 2010, up from 161,240 in 2009. However on January 1 2011 the central bank raised the loan to value ratio.

The loan to value ratio for condominiums costing less than 10 million baht is now 90%, while the ratio for low rise properties will be 95%, applicable to purchase contracts dated on or after January 1, 2012.

Brett Gordon sees this as a sensible move although there are concerns being raised in a report from CB Richard Ellis that limitations on foreign ownership in Thailand could do long-term damage to the market.

This effect is already showing quite clearly in the Bangkok property market as it didn't gain any real income or have any significant property deals during the last quarter of 2010.

The report from CBRE went on to say that although there are concerns about the influx of foreign capital into Thailand the restrictions mean that the property investment market remains largely the domain of domestic buyers.

However the threat of a property bubble in the condominium market has subsided due to decreased demand and a reduction in supply.

For his part Brett Gordon sees the retail sector in Thailand as being the most interesting, in particular the small listed retails. He feels that the dominance of large listed retails in the country has reached its maximum.

Housing Market in Bangkok Still Expected to Grow

The housing market in Bangkok experienced rapidly rising prices during the first half of last year which were mainly attributed to Government incentives which came to an end last March. Prices increased in spite of political unrest in April and May which did not cause panic selling although it did delay some projects. Many new housing developments were begun last year, and although prices are expected to continue increasing they will not rise as rapidly as last year. Surveys have shown that that there is not an oversupply in the Bangkok condominium market and that property investment is can be expected to give an average total yield of 11.5 % per year.

New regulations brought in this month prohibit banks from lending more than 90% of the value on new condominiums costing less than 10,000 baht. These measures were brought in to deter property speculators who were finding the terms just too attractive to resist. Condominiums in the city have an average 21% vacancy rate, although investors should do their research thoroughly as some areas are showing much higher occupancy rates. Ramkhamhaeng has an occupancy rate of 91% and gives a total yield of 11.7%. Occupancy in Ratchada-Lat Phrao is 86% and gives a total yield of 11.9%.

The most popular properties are one-bedroom units with the market for larger units being slower. These larger units may offer some appeal to investors as developers have been offering extra incentives such as furniture packages and guaranteed yields. Demand has remained high enough to deter developers from offering discounts.