Hong Kong’s protest rallies force Thai developer to defer sales launch of ultra luxury apartments in Bangkok
- More than half of the condo’s foreign buyers from Hong Kong and mainland China
- Strict capital controls in the mainland means money for overseas investments must pass through Hong Kong
Magnolia Quality Development Corporation, the developer of an ultra luxury apartment complex in Thailand, said it had to put off the marketing plan to sell the remaining units of its project in Hong Kong, as 11 weeks of protest rallies in the city showed no signs of letting up.
At The Residences at Mandarin Oriental in Bangkok, a 52-storey ultra-luxury condominium completed last week, about 30 per cent had been sold to foreign buyers, of which the majority were from Hong Kong and mainland China. About 85 per cent of the units have been sold, behind the developer’s original target.
“For the [remaining] 15 per cent, we planned to market more in China and Hong Kong … but with the recent situation in Hong Kong, we have to wait,” said the developer’s vice-president of marketing Peachpattha Pakakan, in a phone interview.
A unit at The Residences starts from 47 million baht (US$1.53 million) and up to 450 million baht.
Strict capital controls in mainland China gives Hong Kong a key role in funnelling Chinese funds for overseas investments.
“When [the Chinese] buy something that requires a large capital, it's not easy to transfer the money out,” Peachpattha said, adding that high-net worth individuals on the mainland usually have somebody in Hong Kong making these purchases for them.
Chinese investors have in recent years taken a shine to Bangkok’s upscale condominiums because of the potential capital gains from the growing scarcity of prime land in the Thai capital.
“Many foreign buyers are lured by relatively more affordable prices compared to developed markets, many of which do not offer more attractive yields than Bangkok,” said Nonraphat Pornsinkunanon, head of residential at real estate services firm Jones Lang LaSalle Thailand. “In most cases, products of similar quality in Bangkok are half the of Singapore and five times cheaper than in Hong Kong.”
Thailand’s government has also been on a mission to draw high-net worth individuals to live in the country through its special visa programme introduced in 2003.
“In the last two years, buyers from mainland China were the top source of foreign demand for luxury condominiums in Bangkok (by purchase value), ” Nonraphat said. “We estimate that they represented nearly half of all foreign demand. But this year, demand by buyers from [China] declined substantially.”
Across the entire condominium market in Thailand, demand has shrunk as a result of rising interest rates and new mortgage restrictions that came into effect this year. Thai developers have hence increased their reliance on foreign sales, particularly from China, which are highly sensitive to economic conditions of the buyer’s home country, according to CBRE.
“Several projects have reached their foreign ownership quota limits (49 per cent of the saleable area) which has been a very rare occurrence in the past,” CBRE wrote in a 2019 market outlook report, warning that heavy reliance on foreign demand might not be a sustainable strategy.
To be sure, wealthy Thais are currently still the country’s biggest buyers, making up 70 per cent of all luxury condominium sales, according to JLL.
Despite the warning bells, ultra-luxury developments likeThe Residences might continue to stay in high demand among an emerging subculture of wealthy mainland Chinese buyers.
“Our observations reveal interesting findings about Chinese demand,” said Nonraphat. She found that buyers from mainland China are shopping for “rare” and “special” units – a collector’s item of sorts.
As the first branded residence of Hong Kong-based Mandarin Oriental Hotel Group in Southeast Asia, The Residence fits that bill perfectly.
“One of my client is a collector of branded residences,” said Peachpattha, adding that the client snapped up a unit without much hesitation.
