MORE DEMAND FOR OLDER CONDOS IN CBD

       Since the price of luxury condominiums in Bangkok's central business district (CBD) have been increasing dramatically over the past six years, buyers are now opting more for afforable units in older buildings.
       However, according to Jones Lang LaSalle, a professional services firm specialising in real estate, there are several factors that buyers need to consider when purchasing units under the current market conditions, where both old and new condo units are in huge supply.
       The firm's chief of the residential division, Daonum Lilavivat, said Jones Lang LaSalle has seen increased interest in used luxury condominium units that are being offered at relatively attractive prices, particularly those in well-managed buildings. In fact, some of these used units are even being sold at half the price being commanded by brand new or under-construction projects.
       Findings from Jones Lang LaSalle's recent market survey indicate that newly completed or under-construction projects in Bangkok's CBD are now priced at between Bt110,000 and Bt200,000 per square metre, while units in older buildings (aged a decade or more) in the same area are going for between Bt55,000 and Bt90,000 per sqm.
       "Customers who purchased units in older buildings say that apart from them being cheaper, most older buildings in the luxury segment offer relatively larger common spaces and full recreational facilities. These amenities include large swimming pools, fitness/sauna rooms and tennis courts, which are not typically provided in many new projects. In addition, some buyers prefer the more 'cosy' environment offered by older buildings instead of the 'hotel-like' atmosphere in new buildings," Daonum said.
       She also says that purchasing used luxury condominium units in the CBD for own occupation now is a sound decision. "Strong competition in the leasing market due to the rapid growth of new condominiums has put downward pressure on rents. Many owners who boughtj condominiums for investment purposes many years ago may now find it difficult to get their units rented as most tenants prefer newer buildings. For this reason, these investors are keen to divest their holdings," she explained.
       Daonum's views are supported by Jones Lang LaSalle's latest market study, which provided an analysis of gross and net yields in the high-end market.
       Dan Tantisunthorn, head of research at the firm, said: "In a study to be published shortly, we found that the average resale price and current borrowing rates have adjusted to a level resulting in a gross yield that would attract end-user buyers. At these same price levels and assuming there is no vacancy, investors can earn a net yield above long-term 'risk-free' rates, despite the yield on some of these, such as the recent government bond issue, rising."
       Doanum also belives buyers can expect capital appreciation in the long term because there are less sites/land plots available for new developments, while development costs of future projects are likely to rise. Nonetheless, investors looking to buy used units to let at this time should be very cautious, Daonum said. "Apart from the downward pressue on rents because of strong competition and tenants' preference for newer buildings, an investor may also have to make a big cash outlay to renovate the unit prior kto putting it up for rent."