Bangkok market picks up in Q2

Bangkok's residential market improved in the second quarter on reviving demand but office occupancy saw its fifth consecutive quarterly drop, according to the property agency DTZ.
Activity in the capital's residential market increased in the second quarter, with the average cumulative take-up rate of new units at 66.2%, up 2.5 percentage points from the first quarter.

Demand is being stimulated by government tax incentives and developers' promotion campaigns, said DTZ.But prices showed little change in the second quarter as the secondary market has become more competitive, making developers price their projects realistically to increase sales.

The average capital value for all grades of CBD central business district condominiums slipped to 82,000 baht per square metre, down 0.3% quarter-on-quarter and 0.6% year-on-year. Average capital values for CBD grade A units stayed at 101,200 baht per sq m at the end of second quarter.

Strong demand in Bangkok's residential market looks set to continue in the second half, with prices remaining stable due to improved sentiment.The agency forecast that development activity in the residential sector is also likely to increase as developers' confidence picks up.

Domestic buyers will support the residential market over the rest of 2009 as foreign buyers are not expected to return until next year.Meanwhile, Bangkok's office market remains dim because of weak demand and oversupply, says the agency.Average occupancy of grade-A CBD office buildings fell to 85% in the second quarter, down 2.4 percentage points from the first quarter.

Softening demand from the corporate sector has forced landlords to offer more concessionary terms as well as discounts and allowances to attract and retain tenants. However, this has had little impact on lifting take-up.Average grade-A CBD rents in the second quarter shrunk by 2.5% from the previous quarter to 652 baht per sq m per month. Core grade-A CBD rents - Wireless, Phloen Chit, Ratchadamri, Sathon and Silom - dropped to 700 baht per sq m per month, down 2.1% quarter-on-quarter.

Rents are likely to continue to decline through the second half of 2009 due to the dim business outlook. The fall in rents will be mitigated by limited supply this year as very few office buildings are under construction in the CBD.