The supply of completed freehold and leasehold condominium units totaled 48,128 units as of the first quarter of 2007. The completion of four projects added 1,580 units to the condominium market, which increased by 3.4% quarter-on-quarter and 9.5% year-on-year. Sukhumvit remains the most popular area, where about 34.6% of the condominium supply and nearly 50% of the grade A condominiums are located.

The condominium vacancy rate increased slightly in both the grade A and grade B markets. The overall vacancy rate of downtown freehold condominium was at 15.9% in the first quarter, a rise from the 15.2% recorded in the fourth quarter. Grade A buildings have somewhat higher vacancy rates than those of grade B buildings on average, at 18.3% for grade A units compared with 15.7% for grade B.

More people are looking at investment in property for the rental returns. Falling interest rates have forced many investors to look for other investment options other than low-yield bonds and stocks, and investing in physical properties has emerged as a good alternative. Luxury and high-end condominiums in prime areas are proving to be in high demand because there is recognition that there are few freehold sites available in prime locations. Foreign buyers are still important in this luxury segment.

Supply
Total downtown supply grew by 9.5% year-on-year and 3.4% quarter-on-quarter in the first quarter of 2007. The total downtown condominium stock increased to 48,128 units during the first quarter of 2007, comprising 46,152 freehold condominium units and 1,976 leasehold condominium units. 34.6% of downtown condominium units are located in the Sukhumvit area. This is followed by the Riverside/Rama III area and the Silom/Sathon area, with a 31.4% and 21.4% market share, respectively.

There were four newly completed condominium projects in the first quarter of 2007: The Height, Urbana Sathon, La Vie En Rose Place and Lumpini Place Narathiwat Chaophraya. These four projects have added 1,580 units to the market. Two of the projects are located in the Sukhumvit area with 129 units. Most of these projects were launched in 2004, with only 1% of their units still on the market.

As of the first quarter of 2007, the number of future condominium units in the peripheral areas totaled 33,000 units. This number includes only major projects outside the downtown area, mainly projects along the mass transit systems. Newly launched condominium projects are located in ThonBuri and Paholyothin, which are, seen as the new popular areas, and have a 35% share of the market.

Demand
The occupancy rate fell slightly from 84.8% in the fourth quarter of 2006 to 84.1% in the first quarter of 2007. However, the total number of occupied freehold condominium units rose from 37,802 to 38,793 units, comprising 4,102 grade A condominiums and 34,691 grade B condominiums. This fall in occupancy was due to the total supply increasing at a faster rate (3.4% quarter-on-quarter) than the total number of units occupied (2.6% quarter-on-quarter). Occupancy rates were highest in the Central Lumpini (92.5%) and Sukhumvit areas (89.7%)

Vacancy rates of completed condominium buildings have started to rise since 2006. The units are either being decorated or are for sale on the secondary market. Grade A condominiums have higher vacancy rates than those of grade B on average, at 18.3% for grade A units compared with 15.7% for grade B. The overall vacancy rate of downtown freehold condominiums was 15.9% in the first quarter of 2007.

Trend
More people are looking at investment in property for the rental returns. Luxury and high-end condominiums in prime areas are proving to be in high demand because it is recognized that there are few freehold sites available in prime locations. The changing lifestyle of home buyers seeking to live closer to their work place is another key factor affecting the city condominium market. Overall, prices have continued to increase but there were significant differences in the pricing of old projects, depending on their quality. Prices for off-plan sales have continued to increase, driven by higher land prices and high construction costs.

CB Richard Ellis (Thailand) - http://www.cbre.co.th - established an office in Bangkok in 1988 and in Phuket in 2004. The firm has grown to be a leading real estate services provider, offering a full range of services including sales and leasing for all types of property, property and facilities management, valuation and advisory, and research and consulting.