Despite increased competition from rental units in condominiums, the prospects for the single-ownership apartment market in the prime areas of Bangkok are still positive, according to property consultant CBRE.
Most expatriates working in Bangkok rent rather than buy a property. The expatriate rental market is competitive because the number of expats working in Bangkok is not growing, except for the Chinese. However, most Chinese expats have much lower housing budgets than Japanese, American and European expatriate tenants who have been the traditional source of demand for central Bangkok residential rental property.
Based on over 3,000 residential rental transactions over the last 10 years completed by CBRE, rental budgets have not grown. The median monthly rent is around 90,000 baht for a three-bedroom unit and 80,000 baht for a two-bedroom unit.
It is worth noting that CBRE focuses on the upper end of the market, so these numbers are higher than the average achieved rents for the whole of the expat rental market.
Most expats only want to live in a limited number of locations, with the preferred locations between Asok and Thong Lor on Sukhumvit Road, Lumpini and parts of Sathon. They tend to rent in an apartment where one entity owns the whole building, or from an individual buy-to-rent investor in a multi-ownership condominium building.
Based on the latest survey by CBRE Research, “expatriate standard” single-ownership apartment buildings in downtown Bangkok contain a total of only 10,000 units. By comparison, there were 80,000 condominium units in the same preferred expatriate rental locations. CBRE estimates 35-40% of these units are owned by buy-to-rent investors. There is limited new apartment supply, but continued growth in condominium supply.
Many tenants, particularly Japanese expats, prefer to rent in apartment buildings where they have a single point of contact with the owners’ representative for all management and maintenance issues.
In a condominium, the building’s property manager is responsible only for the management of the common areas and not for maintenance inside the units.
“Although expat tenant numbers and their rental budgets are not growing, there are still profitable opportunities for apartment developers despite increased competition from rental units in condos,” said Theerathorn Prapunpong, head of advisory and transaction services (residential leasing) at CBRE Thailand.
The key to success for landlords, he says, is not just location but providing the optimum unit size by maximizing the utility of the space, and providing a high standard of finishing, furnishing, facilities, and appliances.
A good example of an expat-friendly building is the recently completed Jitimont Residence opposite J Avenue on Thong Lor Soi 16, for which CBRE is the sole leasing agent and property manager. The development shows how single-ownership rental apartments can still compete with condos with a range of units from 1-3 bedrooms, together with a design and specification that appeals to expat tenants.
Mr. Theerathorn does not foresee a big increase in expat tenants or their housing budgets this year but believes quality apartments will still achieve high rentals and occupancy.