Amid changing market, Thai high-end condos see spike in rental demand

For the first time in three years, there is a surge in demand to rent luxury condominiums in Thailand, mostly from foreigners affected by the Russia-Ukraine war and long-term-stay foreigners. Rents of high-end condominiums in Bangkok have soared to 100,000 baht per month.

Sunchai Kooakachai, director and head of research and consultancy at Knight Frank Thailand, believes it would be a positive sign for the condominium market if rentals start to recover as the Covid-19 crisis eases, and people start travelling overseas again. In Thailand, this is reflected in the increasing number of foreign tourists since the end of last year, as well as foreign corporate workers and long-term-stay foreign visitors.

The recovery of the condominium market has been partly facilitated by the Russia-Ukraine war, especially in Bangkok, where there has been an influx of Russian tourists. The increase in demand has helped stimulate the condo rental market. Moreover, with China opening up, there would be a group of FIT (free individual travellers) visiting Thailand, which would help stimulate the condo rental market, Sunchai said.

This is an opportunity to generate income from renting out to foreigners, especially high-end condos in the central business district where foreigners are interested in staying for extended periods (long-stay), pushing up rental rates. For example, the rent of a one-bedroom condo in the Lumpini, Sathon, and Silom areas near a large department store during the Covid-19 period dropped to 35,000 baht per month, but now the price has increased to 50,000 baht per month, on par with before the pandemic, Sunchai added.

The rental market for condominiums in Bangkok still has limitations due to the large number of hotels that are ready to accommodate tourists. However, there are still groups of tourists who want to travel independently and prefer to rent condos instead of using hotel services, as it is more expensive. This trend is growing and the strong demand is driving up condominium rental rates, according to Sunchai.

Recently, there has been a significant increase in demand for condos in the rental range of 50,000-70,000 baht per month up to 100,000 baht per month. This group of customers has high purchasing power that focuses on renting high-end condos, Sunchai said.

According to Sunchai, the rental market in the area from Asoke to Phra Khanong, which mainly consists of corporate employees, has also seen some changes. The main group of tenants in this area are employees who work in Bangkok, but due to the work-from-home policy, some have moved out of the city, making it difficult to attract them back to rent condos near BTS stations at a price of 20,000 baht per month.

Currently, most office workers work in the office three days a week and from home for two days, which has reduced the demand for condo rentals. Even if Covid-19 disappears, the demand for rentals will not be the same as before. The prices of condos in the city centre have not increased much, despite the limited supply. The rental rate for the Asoke-Phrom Phong area, which used to be 20,000 baht, is now only 15,000 baht as renters' purchasing power is still weaker than pre-Covid-19 times. However, condo rates in the heart of Bangkok's business district, or prime areas have return to normalcy, Sunchai explained.

The traditional rental market for corporate clients will have to make up for the decline in employee renters by attracting tourists, Sunchai added.

He believes Bangkok's condo rental market should improve with the return of Chinese tourists. There would be a shift from rental to buying condos again, which is expected to take 1-2 years, he said.

Sunchai said the condo rental market will emerge as a major competitor to Airbnb and 3-4-star hotels that are competing for FIT customers, and digital nomads or backpacker groups who can work remotely for 90-95% of the time. This group mostly comprises Europeans who like to stay long-term for months, and their numbers have been increasing.

The proportion of the Thai condo rental market will likely shift from reliance on 70% local / foreign corporate employees and 30% nomad group (visitors who come to stay long-term and rent monthly) to 50/50 between local/foreign corporate staff and nomads, according to Sunchai.