Bangkok rental market continues to prosper

Dawn Ferguson from Thailand property reported that real estate in Thailand is raising the bar as rental prices now vary between 70,000 to 100,000 baht a month; and as more and more high-paid expats make their way to Bangkok, we’re seeing that they surely have more money to burn. They also want their new houses/condos with all the Western-amenities they’re accustomed too.

Growth is inevitable

For condominium and home owners, this section of the marketplace is a possible cash cow, particularly given that most of these expats are here on a short-term basis. The data is definitely promising, however as competition grows amongst more competitors in the area, it’s not such an easy market to enter into.

CB Richard Ellis who is a Thailand executive director at James Pitchon informed Property Report Thailand that the demand for high-end leases increased in 2006, and the variety of migrants in Bangkok with work licenses grew to 67,412 in 2006, which was a 12.5% boost year for that year (according to statistics by the Alien Occupational Control department of the Department of Employment). The biggest sector of this market is Japanese accounting for 22% of the market; and as the so-called “land of the rising sun”, it is the biggest foreign direct investor in Thailand.

Rental homes in Thailand

Pitchon kept in mind that the rental market is in reality even higher, as those numbers leave out diplomats and companies, such as the United Nations. They likewise leave out foreigners without work permits; however Pitchon states they consider the majority of these to be part of the senior citizen market, who typically purchase their property with cash.

Last year there was only a limited supply of new homes, and these were just about 330 of the projects which were finished last year. This will continue to be the case in the next two to three years,” he said, but included that this figure left out serviced houses, which are considered a totally different kind of property – somewhere in between a home and a hotel.

Expat demands

“From a supply perspective, the huge concern is that the number of these homes are expat quality, and the number of owners of these new condos will wish to rent them out?” asks Pitchon. “Recently, a brand-new supply has appeared in the downtown location, and there’s been a higher focus on smaller sized systems, a lot of them focused on the Thai market; so, not all the new condominium supply will be of a requirement that appeals to expats, however there are a lot of apartment complexes that may.”

Pitchon also states that the percentage of owner occupation and systems acquired by people on a buy-to-lease basis varies from building to structure: “Of the developments that are just coming up to completion, the number that will be available for lease varies between 30-50% at the moment. So, although demand has risen, there will be a shortage of condos to meet this demand.”

This means that competition is going to be tight in the coming years. Typically, if expats were offered the option, they would choose a single ownership apartment, says Pitchon. This is because the owner has the ability to service all their requirements, whereas in the case of a condo, the owner may not even reside in Thailand. And oftentimes, as is usually the case, the owner hasn’t even put in place a property manager to take care of his/her home. The obstacle for condominium owners who have actually leased it out is how to manage their properties due to the fact that occupants will start posing questions.

“So, if the air conditioner breaks down, who’s going to fix it? It will not be the staff looking after the common locations of the condominium, since their obligation is not private, residential or commercial property. Owners should find a way on how they will manage and maintain the units.”

This consists of executing bug control agreements, regular A/C maintenance agreements, and, most importantly, there needs to be a clear understanding between the owner and the renter of who’s responsible for doing what.

Popular areas

The most popular area for expats is still the Sukhumvit area, followed by Central Lumpini and Sathorn. There are two hot locations: one being around the International School of Bangkok, and the smaller sized cluster around Bangkok Pattana School. When it comes to the up-and-coming riverside, presently there is little demand from expatriate occupants, this is typically because of the fact that there exist accessibility problems. A small segment of expats are heading to other areas, such as Thonglor. “Again, you’ve got to have access to the skytrain, however in a somewhat lower density environment,” stated Pitchon.

Lumpini Park

The expat rental market is normally driven by housing allowances, which are given to staff members and workers, who generally end up investing all of their allowance, which is not even their own money. “The most significant change in the market has been the fact that the Japanese householders are now getting higher allowances than they did previously,” says Pitchon.

“What’s occurred is that much of the existing stock is over 10 years old. We’ve seen extremely few apartments or condos being built due to the monetary crisis over the last 10 years; and yet, what has actually has been happening is that there’s a brand-new supply of smaller sized units, which is actually getting greater lease terms due to the fact that they look more modern and urbanized.”

When it comes to leasing houses, Pitchon states that the market cap is small because there is a restricted supply of homes in central locations, mainly nestled in the Sukhumvit area. “Sansiri at 67 had leased well, however there is a restricted market for people with over 100,000 baht a month to spend,” he said, and “there are few companies that pay that kind of a real estate allowance.”

When it comes to a ‘two-tiered’ rate for Thais and Foreigners, there actually isn’t a Thai rental market. Consider the fact that Thais have the flexibility to offer and purchase what they choose, which unlike foreigners, those with higher wages and incomes simply will not head out and start to lease a 75,000 a-month apartment or condo. There is no Thai market at 15,000 baht a month (give or take).

Allowances

“The rental market is efficient in terms of transparent rates, information on items and on its regular turnover,” stated Pitchon. “So if a building doesn’t keep its requirements, then new expats will stagnate from moving into it.”

“Recently, a new supply has appeared in the downtown area, and there’s been a higher focus on smaller sized properties. Many of them are intended for the Thai market; so, not all of the brand-new condo supply will meet all the requirements that appeal to expats, but there are a lot of new condos out there that may.”

The expat rental market is generally driven by housing allowances, and employees usually invest all of that amount, thereby not putting any of their own money in it. “The greatest change in the market has actually been that Japanese households are now getting higher allowances than they formerly did,” says Pitchon. As for real estate rentals, Pitchon states that the market is small because there a minimal supply of houses in main areas, such as the Sukhumvit area. As for the ‘two-tiered’ rates for Thais and Foreigners, there truly isn’t a Thai rental market. Expats typically like to use online housing portals when it comes to looking for their next big & memorable rental. Thaimax Property offers every expat the tools and services they need to facilitating their needs.

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