Real estate prices are not driven by location alone and a building’s age is not the only other driving factor.

Purchasers who are looking to buy older properties need to understand the overall market, as well as the micro market for properties in different locations.

Even when located in the same area, the price difference between condominiums in new and older buildings continues to widen in Bangkok.

The average price of new luxury condominiums in prime downtown locations range between 250,000-350,000 baht per square metre compared to 65,000-150,000 per sq m in older buildings in similar locations.

While there has always been a preference for new buildings, especially from Thai purchasers, the price difference between old and new projects are getting considerably more sizeable.

Older buildings in Bangkok face two primary issues that make it difficult for them to compete with new buildings.

The first issue involves the design and layout. Prior to the mid-2000s, condominiums were still a relatively new type of residential product for the Thai market and many developers then did not have design expertise.

Older buildings have older specifications with low ceilings and small windows which can make residents feel claustrophobic. The floor plan often resulted in a lot of wasted space, with large units sectioned off to make more rooms, resulting in the units seeming small even though they were large in terms of square metres. 

The other issue involves maintenance and management. Buildings which are 10 years old or more often require a lot of maintenance.

Owners of units in older buildings, especially those that do not have good building management, will face steep investments to renovate their buildings to meet modern standards. In addition, many owners of older buildings either cannot, or will not, spend the money needed for these upgrades.

For some buildings, renovations to modern standards may not even be possible due to the way they were designed.

Only a very limited number of very well maintained older buildings located in prime areas such as Somkid Gardens, completed in 1992, with a sale price of 35,000 baht per sq m and Domus 18, completed in 2006, with a sale price of around 100,000 baht per sq m, can still command respectable resale prices of around 170,000-230,000 baht per sq m.

By comparison, new units are selling at prices which begin at around 280,000 per sq m. However, buildings like these are few and availability is very limited.

The high prices of new buildings are supported by a few key factors that justify their high costs compared to older buildings. 

In recent years, land prices have been increasing at a much faster rate compared to the construction costs due to the scarcity of prime land available for development in the central business district. As a result, the land cost is a much larger factor driving the sales cost per sq m of a project. 

Design is most likely the biggest reason why buyers of luxury products choose new buildings over older ones.

Buyers of this class of product expect impressive materials, functional specifications, better floor plans and room layouts, as well as the latest mechanical and electrical systems to ensure that their units are comfortable, efficient, and healthy.

Therefore, even well-maintained older buildings cannot compete in terms of area per sq m with the new cutting-edge projects from developers, so they must compete on price.

Buyers that have the money to invest will generally opt for these newer units because they are modern and feature better functionality, more luxurious building design, and the latest innovations in technology.

Developers of many new projects also feature branded property management to ensure that buyers are assured of the quality of the building management, concierge services, and long-term maintenance of their new investments. 

The disadvantages of older buildings have resulted in a relatively illiquid trading market for resale condominiums in older buildings. They are therefore traded at a discount to new off-plan sales in the same location.

In comparison with existing and new buildings in a similar location, design, quality, and specifications of private and common areas, optimum unit size and layout, availability of units, and maintenance are the key factors that help to determine what price a resale unit can command compared to a new one.

Chotika Tungsirisurp is associate director and Ratha Techasopapan is analyst at CBRE Research and Consulting, CBRE Thailand. They can reached at bangkok@cbre.co.th Facebook: CBRE.Thailand Twitter: @CBREThailand and LinkedIn: CBRE Thailand Website: www.cbre.co.th