Pattaya's Mid-Range Property Market Rises From the Ashes
According to The Phuket News, the mid-range property market in Thailand is poised to make a comeback, following the global financial crisis in 2008 the mid-range property market suffered worldwide.
Indeed, Kingdom has just begun construction of Southpoint, its first project, and Nigel Cornick, CEO of a Pattaya real estate company, already sees indicators of recovery in the property market.
Cornick stated, “I believe it will come back because Thailand is now seen as less risky. We’ve seen that to some extent in Southpoint where the Japanese have bought around 10 units. Russians are also buying, and we are selling two-bedroom units for up to THB9 million (US$295,667).”
Cornick added that Russians make up the biggest number of buyers in the Pattaya market, stating, “They are by far the largest market”.
At the low-end of the market, Southpoint also has condominiums priced at approximately THB2 million (US$65,703) which appeal to the growing Thai middle class.
According to The Phuket News, Cornick is in some respects ahead of larger Bangkok based property developers, as Kingdom have low-end projects currently underway in Pattaya, whilst some larger developers like Sansiri have yet to make begin any projects in the popular resort city.
Cornick stated, “I don’t think it will be long before people like Sansiri will step it up a pace [at the lower end of the market] in Pattaya, because Pattaya’s got that backdrop of the eastern seaboard, the industrial base, where you have people with the potential to buy a condo for THB1 million (US$32,851) plus.”
However, Cornick does anticipate difficulties for low-end developers, saying, “The stuff that’s being churned out now is easy to sell but the difficult thing will be delivering, because construction costs without a doubt are rising and will continue to rise.”
Cornick believes that the main problem is labour. The THB300 (US$9.85) daily minimum wage is having an effect, and the expanding economies of Myanmar and Cambodia will observe an increasing demand for labour. These countries have up to now provided most of the labour for Thailand’s property developers.
“So these margins [on low end developments] will come under real pressure. The quality of what you get for that money – and a lot of it hasn’t been built yet – will not be up to much. It can’t be” said Cornick.
According to Cornick, Kingdom is averaging sales prices of approximately THB90,000 (US$2,956) per square metre for its Southpoint units, THB40,000 (US$1,314) of which is purely construction costs. Factoring in the further expenses of marketing, fees and the price of land, Kingdom needs to sell units at around THB65,000 (US$2,135) per square metre to begin making a profit.
Cornick stated, “We’re very keen to make sure the first project sets the standard… so we aren’t necessarily being as greedy as we might otherwise be.”