Although the Bangkok penthouse property sector represents just a small part of the overall market, lower rental yields have discouraged property buyers from investing the sector.
The head of real estate firm JLL’s Thailand operations, Suphin Mechuchep, said: “The growth of supply in this segment is confined by the definition of a penthouse itself which, generally, must be situated on the top floor of the building and offers larger usable space than regular condominium units in the same development.”
According to JLL’s Thailand Property Intelligence Centre, the penthouse supply in Bangkok has seen an accelerated growth since 2013, with an average of more than 80 units entering the market per annum between 2013 and 2018, accounting for a 7 percent annual growth.
Despite faster growth, the city’s total supply will rise to only 1,590 penthouse units by the end of 2018, accounting for less than 0.3 percent of Bangkok’s total condominium stock.
Of the total, 440 penthouse units are in the luxury and ultra-luxury developments, representing less than 0.1 percent of the market-wide condominium stock.
Whilst supply is limited, there is continued demand from expatriate families for rental penthouse.
JLL said that Bangkok penthouses being offered for rent generally offer more than 300 sqm of usable space with between four- and five-bedrooms.
Asking rents range between THB 250,000 and THB 350,000 per month, and JLL said these penthouse units are leasing well.
“Most of these rental penthouses are in aged condominium developments where investors purchased the units many years ago at a much lower price than now and thus still enjoy rental yields of 3 percent on average,” said Suphin.
“Today, investors purchasing first-hand penthouses to rent out can expect rental yields averaging less than 1 percent. Such low yields have reduced investor appetite to buy penthouses for rental income,” she added.
Lower rental yields have been driven by a sharp increase in the capital values of penthouses.
While the price per sqm of a Bangkok penthouse is generally 20 percent higher than regular units in the same development, prices of condominiums in Bangkok have grown by more than 30 percent in the last five years. Over the same period rental rates have increased by less than 10 percent.
“The rental penthouse market will remain undersupplied in the years ahead,” said Suphin.
“Whilst demand is on an upward trend, supported by a steady growth in the number of expatriates in Bangkok, compressed rental yields will continue to demotivate investors buying penthouse to rent.”
“This is good news for owners of existing penthouses however, demand will concentrate in buildings that are well managed and maintained.”