Thailand's unsold rate for condos at its highest since 2011

The unsold rate hit 2.8% in Q2 as over 1,700 units remained unsold.

According to JLL, developer's aggressive sales efforts in Q2 failed to mitigate weak demand. The unsold rate for condos rose to 2.8% in 2Q20, the highest level since 2011. Over 1,700 units in completed projects remained unsold despite aggressive sales efforts by some developers in the quarter. Demand for new units remained extremely low among local buyers as income uncertainties were looming amidst the global pandemic. The absence of foreign buyers continued to exert pressure on the market.

Here's more from JLL:

Demand for rental apartments also fell in the quarter as some expats chose to walk away from leases and return to their home countries because of COVID-19. At the same time, with international travel banned for all of 2Q20, no new demand sources have been able to enter the market. As a result, apartment vacancy rose by 1.8% q-o-q to 8.9%.
Bearish market outlook results in no new launches

For the first time since 2008, no new condo units were launched in the quarter. A total of 1,749 new condominium units completed in 2Q20. Total prime grade condominium stock in Bangkok now stands at more than 60,000 units. Projects completed in 2Q20 are all located in the Central East along the transit corridor. The first-hand selling prices of these new completions averaged THB 265,000 per sqm.

Apartment stock increased as one older 70-unit project re-entered the market after a total refurbishment. Apartment rental demand has almost always been driven by expatriates whose accommodation budgets have not increased much over the years, resulting in low investment interest and limited new developments over the years, thus the lack of truly new supply.

COVID-19 hits capital values and rents

As take-up rates have significantly slowed in recent months, developers are starting to lower their prices to stimulate new sales. Projects that have discounted more than 20% were able to clear some of their inventory while those whose prices have not dropped are struggling to attract any buyers. Capital values dropped by 3 bps q-o-q.

Net effective rents also declined by 22 bps q-o-q to THB 497 per sqm per month. As the majority of buy-to-let tenants are white-collar workers, the effect of pay cuts and income uncertainties have been discouraging them from signing new leases or renewing their current leases unless owners are willing to lower the rental prices.

Outlook: Gloomy outlook caused by the pandemic and oversupply

Another 9,100 condominium units are scheduled for completion over the next four quarters. We expect unsold rate to continue rising given limited foreign demand and low purchasing sentiment from local buyers.

We expect developers to continue delaying new project launches as new sales are extremely difficult to close. Many developers will be focusing on their current unsold inventories and capital diversification, both within the residential sector (e.g. landed housing) and into other sectors.

Note: This report refers to Bangkok's high-end and luxury residential market.