Increasing Demand For Expat Mid-range Rentals

[george]

Increasing foreigners to fuel demand for mid-range residential rentals

BANGKOK: -- The total number of expatriates with work permits in Bangkok has increased by almost 9,000 in the last year, according the latest figures from the Alien Occupational Control Division of the Department of Employment. This represents a 16% increase from May 2005 and indicates an increasing demand for residential rental property, according to Mr. Theerathorn Prapunpong, Associate Director of Residential Leasing Services at CB Richard Ellis.

“Most expatriates tend to rent rather than buy property in Bangkok because, in many cases, Thailand will be only a temporary posting for 2-3 years. The largest growth has been in the Japanese community who now accounts for 22% of foreigners with work permits in Bangkok,” said Mr Theerathorn. The Central Business District remains the most popular location, with Sukhumvit being particularly favoured by the Japanese community. In the year between May 2005 and May 2006, 463 apartment and 2,393 condominium units were completed in Bangkok’s Central Business District.

CB Richard Ellis believes that 30-40% of the supply of new expatriate-standard condominiums for rent have been bought by investors who will now be seeking tenants for their units.

“There is a constant rotation of expatriates in Bangkok as new staff comes and others leave for new postings,” said Prpunpong. “Incoming expatriates do not usually take over homes occupied by their predecessor, tending to make a fresh choice of accommodation.”

“This means that the market is competitive and the best properties attract the most tenants at the highest rentals. Every two to three years, a landlord will probably need to find a new tenant. Thus, in order to compete, the landlords of apartments need to redecorate and refurbish buildings.”

He suggested that landlords of individual condominium units need to ensure that the interior decoration meets modern tastes and that, together with other co-owners, they spend money on the redecoration of the common areas.

Much of the residential rental stock in Bangkok is now more than ten years old. CB Richard Ellis sees a two-tier market where new, well located and either recently decorated properties or those that have been fully refurbished continue to attract tenants and enjoy the highest rents and occupancy rates.

Those developments that have not been refurbished are increasingly achieving lower occupancy rates and in many cases lower rents.

This is particularly true in the case of condominium units that have not been redecorated for more than ten years and where no improvements have been made to the common areas.

“The best performing properties are achieving rents of Bt500-600sqm/month. The factors that determine high rent include location, unit layout, design and furniture, common area appearance, facilities and unit size,” said Prapunpon adding the three most popular residential locations are Sukhumvit Soi 1-63 and Soi 2-44, Central Lumpini and Sathorn.

In terms of unit size, large units do not always get the best rent per square metre. There is an optimum size for each unit type, provided that the design and space utilization are efficient. For two-bedroom units, 90-120sqm produce the best rent per square metre. For three-bedroom properties, 180sqm is a good rental size.

Expat housing allowances have not increased substantially but tenants now are choosing to spend their allowance on the best located and decorated buildings, even if unit sizes are smaller.

For example, on Sukhumvit Soi 24, tenants have been paying Bt75,000-80,000 per month for 150sqm three-bedroom units in a brand new development which equates to a rent of Bt500-530/sqm per month. But at the same time, a tenant recently paid Bt80,000 for a 300sqm unit in a ten-year-old condominium in the same soi, equating to a rent of only Bt270/sqm.

Demanding on economic growth, the demand for expatriate-standard rental accommodation will continue to grow said CB Richard Ellis. Over the next two years, CB Richard Ellis expects that 850 new apartment units will be completed in the central areas, as well as 13,100 condominium units.

Many of the condominium developments launched over the last twelve months have been smaller sized units. If owners wish to rent these, they will be looking at the lower end of the market.

“There is still likely to be a limited supply of grade A, well-located apartments and condominiums for rent and, as the number of expatriates grows, there will be an upward pressure on rents for these units,” added Prapunpong.

“However, many of the new expatriates working in Bangkok are in mid-management or technical positions with mid-range housing allowances or, in the case of locally hired expatriate workers, no housing allowance. As such, the bulk of expatriate demand will be for the mid-range property market.”

Many of the most recently launched condominium units are small-sized units aimed at the Thai market and therefore may not compete for expatriate tenants.

--property-report.com 2006-09-15

[quadricorrelator]

This news article gives enough information to allow several calculations.

I conclude the following:

1. There are 65,250 foreigners with work permits in Thailand

2. 14,355 of these foreigners with work permits are Japanese

3. If the rate of increase remains at 16%, then the number of foreigners with work permits will double every 4.5 years. In that case Thailand would have 130,000 foreigners with work permits in 2011. This is about .2% of the total population, but about 1.5% of the population of Bangkok.

4. The increase in foreigners with work permits is far outpacing the Thai population growth. This means that the ratio of Thais to foreigners with work permits will decrease, if the rate of increase of foreigners with work permits remains constant.

Calculations follow.

1.

If an increase in 9000 work permits corresponds to a 16% increase in work permits, then we can find the total number of work permits by the following:

(work permits this year - work permits last year)/(work permits last year) = .16

=> 9000/(work permits last year) = .16

=> work permits last year = 9000/.16 = 56,250

=> work permits this year = work permits last year + yearly increase = 65,250

2.

We can also calculate the number of Japanese with work permits since the article states that 22% of the foreigners with work permits are Japanese.

Number of Japanese with work permits is .22*65350 = 15355

3. Rule of 72 gives the number of years to double at the existing growth rate

4.5 = 72/16

[jdinasia]

# of foriegners w/o workpermits leaving the market?

[svenivan]

BANGKOK: -- The total number of expatriates with work permits in Bangkok has increased by almost 9,000 in the last year,

This news article gives enough information to allow several calculations.

I conclude the following:

1. There are 65,250 foreigners with work permits in Thailand

The article tell us about Bangkok, not Thailand.

I have not had time to check the calculations in the rest of your post. Probably OK!

[quadricorrelator]

BANGKOK: -- The total number of expatriates with work permits in Bangkok has increased by almost 9,000 in the last year,

This news article gives enough information to allow several calculations.

I conclude the following:

1. There are 65,250 foreigners with work permits in Thailand

The article tell us about Bangkok, not Thailand.

I have not had time to check the calculations in the rest of your post. Probably OK!

Thank you for the correction.

Based on your correction I conclude that between .5% and 1% of the Bangkok population consists of foreigners with work permits.

[opebo]

80,000 baht/month is midrange??

[Khun Jean]

Many times when 'bad' news comes out of Thailand these reports appear.

Probably getting worried.

16% increase in workpermits, 50% decrease in people who can't get back into Thailand.

[John K]

It will be the Thais that will suffer the most as they are stuck here.