An Outlook on Bangkok’s Buy-To-Let Market
More foreigners than ever before are buying into Bangkok’s lucrative real estate market. The purchase of condominiums has on the whole been very rewarding in recent years for those investments made in the right properties at the right locations. Thai real estate investments in well placed condominiums have proved time and time again to produce high rental yields and good capital gains.
Rental Yield and Capital Gains
Rental yields: This is simply the return on an investment as a percentage of the total amount invested. The gross rental yield is calculated by dividing annual rent by the total value of the property. This figure is then multiplied by 100 to get the actual percentage.
Capital Gains: The profit made from the sale of property. This yield is achieved when there’s an increase in the value of a real estate investment, thus giving it a higher worth than the actual purchase price.
The example below will illustrate the potential of a good property investment in Bangkok.
Noble Refine Condominium
Noble Refine Condominium is located at middle Sukhumvit in the popular Phrom Phong area. Investors here saw rental yields of over 7%, and capital gains have exceeded 10% since the project was first launched. This is pretty good considering it was at a time when the global economic crisis was sweeping across much of the developed world.
Present Day Investment Opportunities
A report by a well-known and highly respected property developer, listed on the SET, states that condominiums in Bangkok’s city center offer on average 6-7% rental yields across the low-mid, mid, and high-end market categories. And the condo resale market within Bangkok remains extremely buoyant, despite the economic and political turmoil of recent times.
In the first quarter of 2013, for example, there were around 16,070 new units launched in the Thai capital, which was the highest number of new launches for many years. This upward trend continued throughout the remainder of 2013 as developers stayed confident about purchasing power and continual demand.
Where to Invest and Why?
We will soon look at some figures, but firstly let’s define some criteria’s within our report. Investing in a condominium in Bangkok can range from the low-mid end up to the high-end luxury units. All these property types can be found close to the city’s mass transit system, i.e. BTS and MRT.
The four main designated areas of Bangkok’s city center are:
- Silom, Sathorn (CBD)
- Central Lumpini (near Lumpinin Park and the Royal Sports Club)
At the time of writing we looked at investments in brand new Bangkok condominium projects. In fact, none of the buildings mentioned here had been completed more than 12 months prior to the first publication of this post. The reason for this is that older units would have been purchased much cheaper, and therefore would not have reflected the current prices, or the rental yields as a percentage of the buying price. Obviously those Bangkok condominiums purchased many years ago will yield higher returns as the purchasing prices would have been considerably lower.
Investments Along the Sukhumvit Road
For the purposes of this brief example, we will focus on investing in a Sukhumvit condominium. The reason for this is that Sukhumvit is without doubt the most popular expatriate residential district of Bangkok, so needless to say that the majority of foreign buyers purchase property in the low, mid, and upper Sukhumvit districts.
In recent years, there has been a huge increase in the amount of Sukhumvit condominiums coming onto the market place. However, this has not stopped the rental yields from remaining attractive. As mentioned earlier, an average 6-7% return on investments is quite typical.
Concerns of an Oversupply!
With such steady growth over so many successive years, it’s understandable that various governmental organisations, and some property experts, have voiced concerns of an “oversupply” in residential units within Bangkok’s many condominiums during 2013 and for 2014. Nevertheless, the majority of developers remain positive and have continued faith in the resilience of the city’s real estate market.
The purchasing price for Sukhumvit condominiums continues to rise. At the time of writing, an average cost is roughly THB 90,000/SQM for a mid-end Sukhumvit condo. For investments in a more luxurious project, prices of approximately THB 115 000/SQM can be expected.
Anticipated Rental Incomes
Investing in a condominium along the Sukhumvit is likely to fetch the following rental returns:
- Studios: 15-20,000 THB/Mo.
- One Bedroom: 30-50,000 THB/Mo.
- Two Bedrooms: 50-80,000 THB/Mo.
Of course, these are just general estimates, and the actual returns will depend on several variables such as location, quality of building, size of unit, and quality of the furnishings in any given buy-to-let property.
Anticipated Capital Gains
Some projects have rewarded investors with capital gains of up to 25%, The Address Chidlom being one such property. But this is exceptional, and on average, new Bangkok condominiums launched in the last 12 months have yielded investors more realistic capital gains of 10%.
Bangkok Property Investment
The best resale condos tend to be the larger two bedroom units. The reason for this is because developers are constructing more studio and one bedroom projects around the city center than any other type. They are focusing on smaller condos simply because they are quicker to sell off-plan and offer good rental yields.
Furthermore, the two bedroom units launched nowadays tend to be smaller than those built in the past. In fact, finding newly built 2-bed units over 90 SQM is becoming something of a rarity, thus the demand for the larger two bedroom condos is currently exceeding supply.
If you are looking for good rental return yields, then you are probably better off investing in a Bangkok condo of 60 SQM in size or less, such as studios or one bedroom units. However, if it is capital gains you are looking for, then purchasing one of the larger two bedroom units of around 100 SQM would likely be your best investment option.
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