Office growth mirrors the economy

The growth in Bangkok’s office market increased in line with the remarkable development of the Thai economy in the late 1980s and early 1990s, as the total supply of office space expanded from around 1.5 million square metres in the early 1990s to about 7.5 million sq m currently.
Companies began to realise the advantages of having quality offices in terms of location, convenience, prestige and effects on employee productivity. Thailand’s economic revolution drove demand for increased office space, and office projects began to offer better premises and facilities, including central air-conditioning, higher ceilings, and improved building floor plates. Tenants and developers soon moved away from office condominiums, as the strata title of such developments made it more difficult to offer seamless building management and services.
Bangkok’s Central Business District (CBD) is now defined by CB Richard Ellis as the area incorporating Silom, Sathon, Surawong, Rama IV, Phloen Chit, Wireless, early Sukhumvit, and Asok roads, and sois in between, but in the early days, the CBD was synonymous with the Silom area. During the 1990s, Thaniya Plaza was one of the most sought-after addresses, with monthly rents of 800-900 baht per square metre. As development increased, the CBD expanded to Sathon and Rama IV, where both the U Chu Liang Building and Abdulrahim Place are located. Opened in 1995, Rama Land Building was one of the first mixed-use developments in Bangkok, combining office, hotel and retail space. Office projects also sprouted up in the diplomatic area of Wireless Road, with All Seasons Place, another mixed-use project, a landmark in this area.
Before the Asian financial crisis, Thailand was one of the most attractive Asian economies for foreign investment, which fuelled demand for and growth in the office sector. However, the 1997 crisis led to many finance companies closing, pushing up vacancies, while other office projects that were under construction were suspended, or in some cases, abandoned as developers ran out of funds. The oversupply worsened in late 1998, and the total supply of roughly 6.3 million square metres suffered through vacancy rates of more than 30%. Vacancies were more pronounced in the CBD.
Some of the buildings suspended during the crisis were later revived by investors who purchased them at a bargain and completed the projects. Q House Lumpini, one of the most prestigious buildings in Bangkok today, was one such case. Other examples include the soon-to-be-completed Chamchuri Square (formerly C.U. Hightech Square), and Exchange Tower, located at the Asok-Sukhumvit junction.
The landscape for office development has changed since the crisis in many ways, as developers recognise the need to distinguish their products in order to compete. Design, facilities and services have all improved. More attention has been paid to the need for regular floor plates to eliminate wasted space. As companies have focused on cost savings, there has been a move toward smaller, more efficient offices, which requires floor plans that allow for easy subdivision. Most new buildings now offer higher ceilings, along with designs that cut down on noise.
Office rents in Bangkok are low when compared to other major cities both regionally and internationally. According to a recent CBRE report, office rents in Bangkok are the lowest of any major city in Asia, with the exception of Jakarta and Kuala Lumpur, and only a fraction of those in Hong Kong and Singapore.
Occupancy rates are now high in Bangkok (close to 90%), and given continually rising construction costs and the scarcity of quality CBD land, we believe that rents will have to increase soon as demand increases, and also in order to make future development worthwhile. Bangkok’s CBD is now firmly anchored by the BTS and MRT systems. Although office space outside the CBD can be had at a 10-30% discount over CBD space, this is a much smaller difference than in most other cities.
Going forward, demand for Bangkok office space will be driven by the country’s growing services sector. Any changes in regulation that encourage foreign participation would accelerate this growth. At the moment, Thailand lags many of its competitors in terms of the incentives given to international companies for setting up in Thailand, but we are hopeful that this will change as the country adopts to an increasingly competitive global economy.

High-end broker E&V aims for Bangkok market growth

The upmarket residential brokerage Engel & Vo¨lkers (Thailand) Co plans aggressive expansion within this year by opening about 10 new outlets in Thailand, including seven in the competitive Bangkok market.

E&V specialises in high-end properties such as this one with an asking price of 60 million baht.

Managing director Martin Phillips said the company next month would open a shop in Samui to list both new and existing units offered for sale.

It also plans to add another shop in Phuket, where E&V opened its first outlet in late 2005. The company is also negotiating to open a shop in Pattaya.

As well, E&V is holding talks with prospective franchisees in Bangkok on the division of territory, to ensure that each one would have more or less equal business opportunities in operating a residential brokerage.

Each investor needs to pay 2.5 million baht for a 10-year contract plus an annual royalty. Normally, it takes about three months to set up a shop and fit the site to conform with the Engel & Vo¨lkers universal look. The company helps to find the location but the investor needs to negotiate the lease terms.

Engel & Vo¨lkers will apply a submarket strategy in the capital, with shops in the central business district as well as suburban locations such as Lat Krabang and Rarm Intra where there are many new residential units with quality meeting the company’s listing standard.

Garry Irvin, the company’s expansion manager, said investors saw the opportunity to enlarge their business with good returns in the future.

Engel & Vo¨lkers worldwide currently has 333 residential shops and 32 commercial offices in 25 countries. It has sold 435 licences in all so more than 100 shops are still in the process of being established. The brand’s turnover last year was 160.7 million.

Its statistics show that the average fee earned by licence holders is 250,000 in the first year of operation and increases to 400,000, 600,000 and 750,000 in subsequent years.

Mr Irvin said that franchisees benefited from a well-recognised brand, and a turnkey operation that the company supports in terms of establishment, coaching and training, and a global network.

‘‘Although we are growing the network and are close to signing certain deals, we do still have some prime territories available,’’ he said.

In Bangkok, E&V will focus on resales first and later start to list new units, which require a different set of skills.

Mr Phillips believes Engel & Vo¨lkers has no direct competitor in Bangkok. He said the capital’s residential resale market was fragmented with local and international brokerages but there was no operator in the same style as E&V.

The company believes that its submarketing strategy creating brand awareness in designated territories will bring about good brand acceptance within one year. It forecasts that 70% of transactions would involve Thai customers and the rest foreign customers buying units in Thailand.

Engel & Vo¨lkers’ research also indicates that 40% of customers purchased units through its shops because they were attracted by the shop design, so the company in Thailand hopes to repeat the proven success in other countries.

Mr Phillips, who opened the first shop in Phuket and is the master licence holder for Southeast Asia, said his shop last year sold assets worth more than one billion baht and he expects stronger sale this year, as the high-end market in Phuket is still firm. He plans to invest in a second shop in Phuket.

The company is also working on granting licences in other countries such as Vietnam, the Philippines and Singapore.

Weak demand forces a switch from Thailand

TCC Capital Land is focusing on Vietnam, which it sees as a very promising market, while scaling back launches in Thailand from four to two a year.
The joint venture between Singaporebased CapitaLand and liquor billionaire Charoen Sirivadhanabhakdi’s TCC Land might further reduce launches in Thailand next year depending on the overall situation, says CEO and managing director Chen Lian Pang.

‘‘So our emphasis is market demand. If there is a demand, we will go ahead. If there is no demand, we will pull back,’’ Mr Chen said. ‘‘We are very flexible because ours is not a listed company so there is no pressure to produce certain amount of revenue.’’

Aside from Vietnam, TCC Capital Land is also keen on India because it considers other key regional countries such as China, Australia and Singapore to have matured.

Among Vietnam’s attractions is its population of 85 million, 60% of whom are under 30 years of age.

‘‘There is a lot of potential and a big mismatch between supply and demand. For instance, over the next three years Ho Chi Minh City requires about six million square metres of housing supply but the supply is only about 1.9 million — a big gap.

‘‘Hanoi is the same. Over the next three years they need about three million square metres but the supply is only about 1.3 million. So the fundamentals there are right.’’

This clearly means that TCC Capital Land will be focusing on the local Vietnamese market, not expatriates, who might be keen on buying villas there. Foreigners are permitted 50-year leaseholds and not freehold in Vietnam.

Mr Chen drew attention to cultural differences, noting that only 15% of property buyers in Hanoi obtain mortgages. The rest pay in cash either by borrowing from relatives or pooling their resources together in order to make the purchase. The trend indicates there is a lot of hidden wealth in the country.

Both China and Vietnam appeal to foreigners. Unlike Thailand, where foreign developers cannot own more than 40% in a company in order to buy land, these two countries do not impose such a restriction. China only requires local participation but not stating the level. Even Malaysia allows foreign developers to own up to 49% in a company.

‘‘In this sense, they [Thais] are losing out to neighbouring countries.’’

Also whether Singaporean investment in Thailand increases or not depends on the return they would obtain. Mr Chen pointed out that most of them sought a yield of 8% to 10%, with 6% seen to be on the low side.

In any case, Mr Chen believes that the region is expected to continue to feel the impact of the US sub-prime crisis for some time, perhaps one to two more years. Personally, he feels the worst is not over.

The slowdown has affected demand in Thailand, as witnessed by the company over the last two years. Even so, prices are unlikely to drop.

In this environment, it is possible that financially weak or heavily leveraged companies might run into trouble and TCC Capital Land is actively looking for opportunities both within Thailand and across the region.

Mr Chen believes many people might be better off to hold cash for now, but if they do want to commit to property, they may see more clarity in the market later this year.

‘‘But of course the price of good property doesn’t go down. For instance, for TCC Capital Land I don’t think we will drop the prices even if we are not able to push sales. We will wait. Property is basically about timing. If you wait, the price will recover.’’

After perching at the high end for some time by launching a string of posh projects such as Athe´ne´e Residence and Emporio Place, TCC Capital Land dramatically moved to the middle segment recently with its new brand S&S, which stands for sufficiency and sustainability. Its first mid-range project is S&S Sukhumvit located on soi 101/1. This project covers more than six rai of land and consists of two condominium towers, 18 and 22 stories, with a total of 810 units. These range from 29.5-squaremetre studios to 68-square-metre twobedroom apartments with prices starting at 1.279 million baht.

TCC Capital has carefully planned its entry into the middle market. Aside from the eco-friendly focus, it plans to be within one to two kilometres of a BTS station, something that is very appealing to this group of buyers.

Mr Chen finds investing in Thailand to be very different from in his native Singapore. Thais are more pricesensitive than Singaporeans. Also, tastes differ with people here preferring more traditional and classical styles while Singaporeans tend to closely follow international trends.

While studios, one- and twobedroom units near the BTS stations are currently popular among Thais, the trend in Singapore before the recent slowdown kicked in was for bigger apartments.

Real-Estate market in Asia to Grow

The flow of capital into the AsiaPacific’s real-estate market from outside the region is accelerating, a report has
said.
This is the result of the credit crisis in the United States and Europe, the report by KPMG, FTSE Group and Asian
Public Real Estate Association (Aprea) said.
The acceleration is coming off the back of prolonged, steady growth, which has been powered by a combination
of opportunistic and increasingly longer- term investments, it said.
“With the credit crisis in the US and Europe, investors are ... looking to Asia for growth,” FTSE quantitative
research head (Asia-Pacific) Jamie Perrett said.
While returns on real-estate investments are expected to decline in most countries, returns in the Asia-Pacific are
expected to remain higher than the global average of slightly more than 5 per cent for the coming year, it said.
Market sentiment in Asia has been hit by the credit crunch but the regional outlook should remain positive, Aprea
chief executive Peter Mitchell said.
“ The sub-prime fallout elsewhere may well act as a catalyst for the inevitable further development of the
Asia-Pacific as a centre of and investment management,” he said.
Real-estate funds will remain the main source of capital for investments in Asia this year.

Raimon Land doubles prices - B300,000 per sq m

High costs push tag to B300,000 per sq m
Raimon Land plans to double the prices of its new luxury condominium to 300,000 baht per square
metre in line with rising production costs, according to chief executive Nigel Cornick.
Construction costs alone have gone up by 20% to about 90,000 baht per square metre, and the
company said it may raise prices of its future projects, starting with the 185 Rajadamri condominium on
Rajadamri Road set to launch by year-end.
Prices of 185 Rajadamri were earlier expected to start at 150,000 baht per sq m. Mr Cornick said he
was not concerned that the price increase would affect sales as most of its projects targeted highend
customers who were less pricesensitive.
It has already increased prices for The River, located on the bank of the Chao Phraya River, to
140,000 baht per sq m from 90,000 baht.
The company expects to realise revenue of two billion baht this year primarily from its previous
projects, with a nine-billion-baht sales backlog carried over from last year.
Raimon Land has two condominiums under construction: the 4.8-billion-baht Northpoint in Pattaya
and the 13-billionbaht project The River, its largest to date. They are are due to finish in 2010 and 2011
respectively.
Raimon Land has secured a fivebillion-baht project loan for the construction of The River, according
to its statement. The loan is a syndicated facility provided by Standard Chartered Bank (Thai) as the lead
lender, TMB Bank and Siam City Bank.
The company now has completed six new properties with a total sales value of six billion baht. Four of
those are in Bangkok under three brands: The Lofts, The Lakes and The Legend. The other two are
Northshore in Pattaya and Kata Gardens in Phuket.
Four projects to be launched this year include 185 Rajadamri in Bangkok, Amalfi in Phuket, The Lofts
Soutshore and Edge in Pattaya. Their combined value would be at least 22.15 billion baht.
It expects to invest 1.3 billion baht in joint-venture projects in Bangkok, Phuket and Pattaya this
year.
As of its earlier plan to raise its registered capital by 1.37 billion shares last month to support its
future projects, Raimon Land is looking to offer its 770 million shares to Thai partners as the Foreign
Business Act restricts foreigners from owning more than a 49% share. The remaining shares would be
offered to its major shareholder IFA Hotels & Resorts of the United Arab Emirates.
The company has been in talks with Thai buyers, especially funds and institutions.
In order to expand into the mass market, Raimon Land yesterday announced a new marketing
strategy to sponsor the reality TV show Superstar, produced by Orchestra Investor Group Co with a
budget of 120 million baht.
It will feature the lives of 14 stars living together in Raimon Land’s The Lofts Yennakart on Sathorn
Road. The show is scheduled to air between Aug 9 and Oct 25 on Channel 9.
‘‘It’s an opportunity to grow our brand as there seem to be a lot of people that don’t know about our
projects,’’ Mr Cornick said.
The show would target young people who could be potential customers of Raimon Land.
Shares of Raimon Land closed on Monday on the Stock Exchange of Thailand at 0.69 baht, down four
satang, in trade worth 270,000 baht.

Condominiums to get costlier in second half

Firms now see construction expenses stabilising, will factor them into projects

developers are planning to launch Bt50 billion worth of city-condominium projects in the second half. But home-buyers will have to shell out more money, because many firms have hammered in the rise in raw-material costs while pricing new projects.

With construction costs expected to stabilise in the second half of the year, developers are planning to launch city-condominium projects worth Bt50 billion during that period.

However, home-buyers will have to shell out more, because many developers have factored in the rise in raw-material costs while pricing new projects.

Many companies, including Plus Property, Sansiri, Property Perfect, Asian Property Development, LPN Development and Chaopraya Mahanakorn, delayed the launch of projects in the first half in the face of rising construction costs.

Property Perfect put off launching of six residential projects worth Bt18.3 billion until the second half, said chief operating officer Teerachon Manomaiphibul. Two of the six projects, Metro Par Ratchada and Metro Park Sukhumvit, are condominiums. The projects are worth Bt4 billion each.

"We delayed launching new city-condominium projects in the first half because we could not estimate how far the construction costs would climb and so could not decide prices for projects. Raw-material prices have seen a rapid rise since last year up through the first half. But we believe the prices will be stable [in the second half]. So we'll launch two city-condominium projects worth a combined Bt8 billion. We've factored in the rise in construction costs while setting prices for the new projects," he said.

LPN Development managing director Opas Sripayak said the company planned to launch four new city-condominium projects under the Lumpini Condo Town brand. The projects, worth about Bt8billion, will target the lower-income group by offering homes at prices under Bt1 million.

"The successful launch of Lumpini Place Rama IX-Ratchada last month boosted confidence in our business-expansion plans for the second half of the year," he said.

Asian Property Development senior executive vice president Visanu Suchatlumpong said his company planned to launch five new city-condominium projects worth a combined Bt10.5 billion in the second half.

They are the Bt800-million The Address on Phya Thai Road, the Bt3.2-billion Life@MRT Ratchada, the Bt1.6-billion Life@Ratchada-Huai Khwang and two projects worth Bt4.9 billion each in Sathorn Soi 12 and Sukhumvit Soi 28.

The company has revised prices 10-14 per cent for the new projects. The average price has risen from Bt70,000 a square metre to between Bt80,000 and Bt90,000, depending on the project's location, Visanu said.

"We've had to raise prices for new projects, in order to offset the rise in construction costs," he said.

Sansiri subsidiary Plus Property also plans to launch six new city-condominium projects worth a combined Bt10 billion in the second half.

Plus Property CEO Mayta Chanchamcharat said his company had delayed the city-condominium projects, because it wanted raw-material prices to stabilise before hammering in the rise in construction costs into new projects.

The company will launch the six projects under the My Condo label but with revised prices. The average prices will rise from Bt1.1 million to between Bt1.9 million and Bt2.1 million.

At a glance

n Property Perfect will launch two city-condominium projects after factoring in rise in costs.

n Asian Property Development has revised prices 10-14 per cent.

n Plus Property has hiked average prices from Bt1.1 million to between Bt1.9 million and Bt2.1 million.

By Somluck Srimalee
The Nation
Published on July 1, 2008

Now's the time to sell condos

Oversupply could push prices downward

Anyone thinking of selling a condominium should do so soon because prices are likely to drop in six to 12 months due to political uncertainty and oversupply, says Ian Soo, managing director of Hamptons Property.

Prices have already stabilised and as more units come on the market, they may be pushed down.

"I think there is an oversupply of units in central Bangkok and I think if you combine that with some sort of political uncertainty then what you will find is less demand," said Mr Soo. "This is effectively going to put pressure on prices."

He said that the downward price pressure was unlikely to be very pronounced in the 1-3 million baht condominium or townhouse segment. "I think the high end of the market will have some stock that will be harder to sell now, so it's more likely to affect the luxury end of the market."

As a lot of the property that was launched a few years ago is now coming on the market, developers will watch how sales pan out over the next six to 12 months. They are in a difficult position because of rising costs, but that does not mean they are going to be able to pass these on to the buyers.

"They can do that when the economy is strong and there is easy credit but not when the economy is stagnant," said Mr Soo.

While this raises fears that lower-quality buildings might be built, Mr Soo does not expect established companies to cut corners but will have to absorb some or all of the costs.

Whether lower prices could turn into a buying opportunity depends on what sorts of units come on the market, in Mr Soo's vie.w

And while sellers would get higher prices if they sell today, he said those who have money to spare are always going to be looking for investments, and property with rental yields of around 6% is not a bad place to park money. "But I think people are being a little bit cautious in this type of environment."

Some expatriate buyers too are holding back, though he says those who have money to invest are still active in the market.

The bright spot is in the rental market, which is unlikely to be affected by the anticipated price drop. But greater choice could lead to better-value units becoming available.

Demand right now is mostly for high-quality one- to two-bedroom units, even though the space is smaller. "There will always be people who will want 300 to 400 square metres, perhaps in an older building further away from the skytrain, but the majority of working professionals living here ... prefer smaller, more modern units."

Hamptons' clients, he says, prefer Sukhumvit as far as Ekamai, plus Silom and Sathon, and these are expected see both rental and buying demand.

Mr Soo said the real estate slowdown was widespread right now, but has not been as serious as in the UK and US because there are more cash buyers in Thailand, which has insulated the country from the credit crisis.

While many think it is good to buy during turbulent times, he said that a lot of people should keep their assets in cash if they are not sure what the situation will be like in a few months.

Although those who bought property during the 1997 meltdown did earn a big profit, this is seems easy in hindsight. "The economic crash of 1997 was huge, very sudden. This economic slowdown is not as dramatic."

Mr Soo urged the government to allow foreigners to get mortgages in Thailand. "They represent a very important part of the property market and expecting them to pay cash or not giving them financial support, something that they should do, is a mistake I think. Not all foreigners are really so rich that they can buy in cash."

NINA SUEBSUKCHAROEN

Developers adjust to cooling of condo fever

The condominium market that began heating up a few years ago is likely to start cooling down and reach a balance point as developers are more cautious about launching new projects when building material costs are volatile. At the same time, prospective buyers of condominiums may hesitate because of concern about higher costs of living and a decrease in their ability to afford new homes.

In fact, higher oil prices had been the factor creating strong demand for the condominium market as people were concerned about travelling expenses. Special interest was shown in those units near mass-transit routes and their planned extension lines.

According to a survey by Agency for Real Estate Affairs (AREA), the average sales rate of condominiums in six major locations _ Ratchada/Lat Phrao/Ratchayothin, Phloen Chit/Sukhumvit/Ekamai, Onnuj/Baring, Silom/Rama III, the western bank of the Chao Phraya River and Bangkok's outskirts _ rose by 40% in 2007 compared to 2006.

However, the average sales rate dropped by 7% in the first quarter of 2008 to 9,247 units from 9,895 in the same period last year.

The only two locations to enjoy an increase in sales were Sukhumvit and the western bank of the Chao Phraya River, up by 33% and 20% respectively.

The highest decrease in sales was in Ratchadaphisek with 46%, followed by Silom/Rama III with 43% and the outskirts by 0.1%, showing a significant downward trend in the condominium market.

Opas Sripayak, managing director of the low-priced condominium leader L.P.N. Development Plc, said the number of new condominiums launched in the first quarter of the year decreased compared to the same period last year.

''Some developers were not confident as volatile prices of steel and rising construction costs pushed unit prices higher while purchasing power was reduced because of inflation,'' he said.

Many developers shifted to develop more low-rise units as supply was limited and they expected single houses and townhouses would be more interesting to homebuyers while tax incentives lasted.

''Everything is becoming more expensive,'' Mr Opas said. ''Low-priced condominiums will be popular during a time of weak purchasing power.''

Teerachon Manomaiphibul, chief operating officer of the listed developer Property Perfect Plc, said higher construction costs were largely being driven by the doubling of steel prices and skyrocketing oil prices since last year.

As a result, construction costs for a condominium building that consumes a lot of steel have risen by at least 30% for construction of less than eight storeys and 35% for more than eight storeys.

Meanwhile, saleable area in a condominium building also has been reduced as stricter rules about environmental concerns require additional utilities in a high-rise residential building.

''Rising construction costs have forced many condominium developers to break their project plans. There will be no more projects at 30,000 to 40,000 baht a square metre,'' Mr Teerachon said. As condominium prices soar, townhouses in the same location might be an alternative.

''Though a condominium project may be sold out, if construction doesn't start or the financial status is not strong, developers may face lower margins and delays in unit transfers,'' he said.

Condo Focus (May 08)

Click the image to download the report

Tourism Condo Thailand

The tourism industry continues as the main driver behind interest in Thailand’s resort condominiums, with holiday destinations close to Bangkok receiving the most attention, especially from international buyers lured by attractive prices.

Thailand’s seaside resorts; namely, Pattaya, Phuket, Koh Samui and Hua Hin, where more than 30% of the country’s luxury condominium inventory is now located, have experienced 9.5% annual growth in international arrivals since 2003, and these strong figures are supporting resort property expansion.

A surge in condominium launches during the second half of 2007 reversed a slowdown that began in mid-2006 and propelled the year-end tally to 2,415 new units. Of these, 67% were located in Pattaya, 26% in Hua Hin, 4% in Phuket and 3% on Koh Samui.

Pattaya’s strong performance was boosted by impressive economic expansion along the eastern seaboard and its proximity to Bangkok and the new Suvarnabhumi Airport.

Luxury condominium launches in Pattaya are trending towards both inland projects with sea views and those with beachfront locations, a reflection of buyers seeking affordable properties regardless of whether or not they have direct beachfront access.

Located three hours southwest of Bangkok, Hua Hin remains attractive due to its relaxing atmosphere, more affordable prices, appeal to Thai buyers and faster development completion schedules. Hua Hin sprang back to life in 2007, with the introduction of 640 units from prominent Bangkok developers, many of whom are launching new projects this year.

Lacklustre demand in Phuket and Koh Samui was linked to hesitant developers baulking at external factors such as currency exchange rates and possible amendments in the Foreign Business Act to make residential property rights more restrictive for non-Thais.

Should the government’s policies on foreign ownership change to allow a higher percentage of foreign ownership, developers will likely introduce more projects in Phuket and Koh Samui to satisfy international demand.

In spite of the deceleration in the rate of new resort development launches in 2007, combined sales value leaped 12% year-on-year to 17 billion baht on the take-up of 1,789 condominium units.

Pattaya’s luxury condominiums sold 544 units worth 6.6 billion baht in 2007, compared to 1,609 launched, for an average of 12.3 million baht.

Hua Hin captured 6.3 billion baht on the sales of 979 units, averaging 6.4 million baht. These projects received strong interest from local investors leading to a majority of the 640 newly launched units being sold.



Limited supply on Koh Samui led to low sales last year, with only 52 units selling for an average of 15.6 million baht. The purchase of 214 units in Phuket generated 3.2 billion baht for an average price of 14.8 million baht.

The average price per square metre (psm) in Pattaya climbed 10% over 2006 to 96,332 baht psm, the highest among all resort areas, followed closely by Phuket at 95,181 baht. Samui units averaged 87,420 baht while those in Hua Hin jumped 14.6% to 72,063 baht.

Of the total resort condo sales in 2007, 27% of the units sold were priced over 100,000 baht psm, and 21% between 80,000 and 100,000 baht psm. Units in the 60,000 to 80,000 baht psm range commanded 29% while those under 60,000 baht made up 23% of the total.

It should be noted that very few of the beachfront or seaview developments are now priced under 100,000 baht psm, and sales at the top 10 most exclusive projects averaged 123,715 baht in 2007.

Of all developments launched since 2003, 1,814 units or 23% were completed as of December last year. Of the remaining 6,177 units, 3,632 were still under construction and 2,545 units were in the planning stages.

These figures demonstrate that there is still very little supply in completed condominiums, as well as a limited number of completed projects in Thailand’s resort locations.

This situation has lifted resale prices, allowing developers to increase the prices of units in new projects while opening the door for investors seeking impressive short-term capital gains.

Foreign buyers accounted a significant portion of condominium purchases in Thailand’s resort areas in 2007, though the most active markets have changed.

Russians rose from outside the Top 10 to head Raimon Land’s 2007 buyer chart, followed by Thais, British and Australians. Germany and China also moved higher while the US and Swedish markets started to slide.

Russians, Thais and British lead Pattaya’s property market, and Phuket is commanded by Russians, British and Australians. Hua Hin remains a predominantly Thai destination, with emerging international interest now making up 20-30% of acquisitions.

In 2008, look for more players and new groups of buyers in Pattaya, with limited completed stock driving up prices. Hua Hin will continue to exhibit strong local demand, with prices increasing in both resale and off-plan projects.

Phuket and Samui will remain vulnerable to external factors. New supply in Phuket will push demand, and look for new areas on the mainland adjacent to the island, now being referred to as Greater Phuket, to open up. Koh Samui will remain a niche market leaning toward branded real estate.

Swiss Park acquired (Sukhumvit 11)

Swiss Park acquired

HOTELS :InVision Hospitality Co, an investment, consultancy and management company, has taken over the Swiss Park Hotel on Sukhumvit Soi 11.

CEO Kevin Beauvais said the acquisition, completed on May 14, would support the company's policy in expanding to target customers ranging from the luxury to mid-tier hotel markets, as well as management and consultancy services for hospitality developers.

InVision's own hotel brands include SOMA Hotels & Resorts, Lantern Hotels & Resorts, and Glow Hotels. It also holds equity and co-invests in some properties.

After the acquisition, the mid-tier Swiss Park with 108 rooms will be renovated by the second half of 2009. It will remain open during the renovations, which will cost about 150 million baht. Once renovations are completed, the hotel will be rebranded as Glow Hotel @ Sukhumvit 11.

Sixteen city-condominium projects in Victory

Offices, Sky Train boost the area’s appeal for homebuyers, investors

Sixteen city-condominium projects, valued at about Bt16 billion, are expected to be launched in the vicinity of the Victory Monument. Most of these projects have sold 30 per cent to 100 per cent within three to six months of opening for booking.

According to a survey conducted by The Nation, these projects are targeted toward the middle- to upperincome segment of the market with prices starting between Bt48,500 per square metre and Bt100,000 per square metre.

The main locations include Phahonyothin Road from Soi 2 till Soi 18, Phayathai Road, Sri Ayudhya Road, Ratchapralop Road and Petchaburi Road.

Resale prices for city condominiums in this area have risen between 10 per cent and 20 per cent this year compared to last year.

Harrison chief executive Alan Lin said that when developers raise prices 10 per cent to 15 per cent of new residential projects to adjust for higher raw- material costs, resale prices of existing residential units will also rise 10 per cent to 20 per cent, depending on the location.

City condominiums located close to the inner Central Business District, in areas such as the Victory Monument, will also witness a significant rise from an average of Bt60,000 per square metre to about Bt80,000 per square metre, Lin said.

According to research conducted by Harrison, a local property consultant, the demand for residential projects around the Victory Monument has risen because this area has many offices and is located close to the mass-transit system.

However, there is limited availability of land for residential projects for sale around the Victory Monument. This is because most land owners have used the land to develop serviced apartments.

The research said population in the Ratchathivi district stood at 97,416 while the residential register recorded 33,769 units, as of January.

Other locations close to the Ratchathivi district, such as the Phayathai district, the Pathumwan district, the Hua Kwan district and Dusit district recorded a population of 332,538 while the residential register showed 125,647 units.

After analysing these figures, Harrison believes that demand for new residential projects in this location will continue to grow, especially for residential units priced between Bt50,000 per square metre and Bt80,000 per square metre.

Last year, the number of completed condominiums in Bangkok stood at 126,071 units, a rise of 21 per cent from 2006’s figures. Of these, 17 per cent were located at Ratchadapisek while another 17 per cent were at Rama III Road. Another 15 per cent were located at Sukhumvit Road, between Soi 70 and Soi 107 and 14 per cent between Soi 1 and Soi 55. A further 9 per cent of the total condominiums were located inside the Central Business District in areas such as Silom, Sathorn, Wireless Road and Pleon Chit. The Thonburi district also had a figure of 9 per cent while Phahonyothin Road had 7 per cent of the total. Phayathai district had 4 per cent of the completed units and the rest of the 8 per cent were located in other areas on the list.

The research also shows that 67,036 city-condominium units are under construction.

It revealed that one- bedroom apartments with a utilisation space between 45 square metres and 55 square metres are the most popular type of city condominiums.

City Resort Development managing director Chaivai Poonlapmongkol said the company believes demand for residential projects in areas close to the Victory Monument and the Sky Train has seen strong growth following the rise in cost of living.

“Buying a property located close to the mass-transit system reduces the transportation costs for homebuyers. People buying properties with an investment focus can also expect good rental income because this location has a number of offices and schools,” he said.

Chaivai said investors can expect a return of 7 per cent to 10 per cent.

• 27 May 2008
• The Nation
• SOMLUCK SRIMALEE THE NATION

Vietnam - Foreigners allowed to buy apartments

HANOI: Vietnam has passed a law allowing certain categories of foreigners to buy apartments beginning in 2009, the first time the communist country has allowed non-citizens to own real estate.

The National Assembly approved the new law on Thursday, with 88% of deputies voting for it, the government said on its official website yesterday..

Foreigners eligible under the law can only buy apartments in developments approved for foreign residency, not houses or land. Ownership will be for a term of 50 years, by which time the foreign owners must sell or transfer the property.

Real estate developers said the law was likely to give a much needed boost to Vietnam’s property markets, which have softened recently after explosive growth in 2007.

‘‘It could have a 20 to 30% impact in terms of rising prices,’’ said William Badger, a manager at Leonidas Management, a subsidiary of the Hong Kongbased real estate company Tung Shing Group.

‘‘Similar laws have been passed in China, Thailand and Malaysia,’’ said Misha Chellam, assistant to the chairman of Hanoi-based developer Vietnam Land. ‘‘Each time in those countries when a law like this was passed, it significantly boosted demand.’’

Those eligible to buy apartments include foreign firms purchasing housing for staff, and four categories of individuals. These include foreigners working at Vietnamese firms, foreigners married to Vietnamese, foreigners with special skills needed by Vietnam’s economy, and foreigners who have been awarded medals or other honours by the government.

It was not immediately clear how much the new law would differ from current law allowing foreigners to obtain 50-year leases on property in Vietnam. Normally in Vietnam, new laws are followed by decrees and circulars clarifying how the law will be implemented, and developers expect that the move from lease to ownership will grant foreigners additional security.

Japan invest Bt7.6 billion in Thailand.

SIAM ZOKAI GETS AGGRESSIVE ON EXPANSION PLAN

Thailand continues to be a key market as the firm designs an overseas foray

Siam Zokai, the property arm of Saha Group, has set aside an investment budget of about Bt5 billion for the development of property projects worth Bt7.6 billion in Bangkok, Phuket and Chiang Mai till 2010, the company’s Japanese president Yasuo Miyazaki said.

Siam Zokai is a joint venture between Saha Group which holds a 51- per- cent stake while Yasuo Miyazaki and his wife own the other 49 per cent. The company has a registered capital of Bt100 million.

The company is developing two property projects worth about Bt3.4 billion. Peaks Town, the first project in Chiang Mai, is worth nearly Bt1 billion. It will have six buildings including Twin Peaks, Peaks Garden, Peaks Changklan, Peaks Avenue, Peaks Mall and Peaks Market. This project is being developed under the community- living concept which integrates residential units and a shopping plaza in the same location.

Construction at Twin Peaks is complete and the building is sold out. The company expects to transfer the units to its customer this year.

The other buildings have also been sold up to 70 per cent and the rest is expected to be lapped up by customers within the year.

Grand Peaks, the company’s second project is worth Bt2.4 billion and is located in the Sriracha district, Chonburi. It is a luxury-condominium project with a 31- storey building and 570 units. Prices start at Bt65,000 per square metre – an increase from last year’s price of Bt60,000 per square metre consequent to construction costs rising. About 200 units have been sold. The project is under construction and is expected to be completed by the middle of next year.

Miyazaki said the company plans to develop three more projects with a cumulative value of Bt4.6 billion in 2010, after the existing projects are completed and sold off.

These three projects include; Peaks Andaman in Phuket worth Bt1.4 billion; North Park Office, an office building worth Bt1.2 billion located at North Park on Vibhawadee Rangsit Road; and Sathupadit Peaks Tower, another luxury-condominium project with a 31- storey building worth Bt2 billion.

The company is studying the market with a view to develop an integrated complex with luxury condominiums, a shopping centre and an office building in the same area with a combined utilisation space of up to 100,000 square metres. The project is likely to be in Bangkok’s Central Business District.

“We cannot give more information about the location of the new project but it will be developed on land already owned by Saha Group. This project may have another Japanese partner. This part is under negotiation,” he said.

The company will also start expansion in the overseas market in the next two to three years with a special focus on Malaysia and Vietnam. Malaysia is helped by a flexible law onforeign investments in the property business.

“Malaysia holds higher for us over Vietnam, where competition and land prices have surged,” he said.

Thailand remains the main market for Siam Zokai’s expansion plans. This is because it believes that demand for residential projects in the country remains strong.

Luxury condo purchases driving market forward

Luxury condo purchases driving market forward

Thailand’s property market remains extremely buoyant despite a number of challenges it faced last year, while continuing to hold enormous potential for accelerated growth.

The resilience is encouraging with takeup rates and numbers of completed developments rising and the price per square metre (psm) of condominiums climbing, enabling investors to achieve healthy returns.

The segment that is really driving the market forward is condominiums, especially in the luxury bracket, evidence that there is high demand for quality product among both overseas and local investors.

Resort destinations have also performed well, despite quota and leasehold restrictions that have put the brakes on the high interest shown among the international investment community.

In recent research conducted by Raimon Land that covered Bangkok and key resort destinations, we can see that despite a tough political climate last year, the inner-city Bangkok condominium segment inched ahead 3% to reach 43.7 billion baht in sales.

Condominiums have clearly become the fastest growing segment in the residential market, with luxury developments emerging as an alternative for many local investors.

A second-half surge in Bangkok condominium demand in 2007 brought the year-end sales tally to 6,214 new units. Achieved prices and sales performances in high-end developments were particularly strong, with investors prepared to pay an additional 50% or more on top of the median price to secure the finest inner-city properties.

Completions of new condominiums have picked up, with 5,100 units added in 2007 compared to the 6,940 units launched. The supply/demand balance remains healthy with about 92% of the units in newly completed developments being sold. Performance in projects that have already started construction on the main structure and those that are still in earlier construction stages is similarly impressive.

Developers in Thailand’s resort areas remained hesitant in 2007 due to uncertainties in new amendments to the Foreign Business Act. However, strong absorption from foreigners, who rushed to buy condominiums with available foreign ownership titles, pushed the total market value for resort condominiums to 17 billion baht, up 12% from 2006.

Locations close to Bangkok, where there is balanced Thai-foreign demand, were the most active. Pattaya led with 6.6 billion baht sold in 2007 followed by Hua Hin with 6.3 billion.

Koh Samui and Phuket, which depend on international investors for around 90% of the demand, were greatly affected by the regulation limiting foreign allocated units to 49% of the total inventory. Although the cap is not new, there was also the fear last year that it would be further strengthened.

This prompted the postponement of new launches, especially among small under-capitalised developers who depend on early bookings. This precipitated a healthy 61% takeup rate in 2007, with buyers snapping up 96% of the units in new developments.

Resort areas are benefiting from very low availability of completed supply, driving up prices in both resale and offplan developments.

In 2007, close to a quarter of the units sold in resort areas were priced above 100,000 baht per square metre, and the number of seaview/beachfront units available for less than 100,000 baht psm is falling rapidly.

In the first quarter of 2008, the industry confirmed the recovery sparked in the last quarter of 2007 and as it approaches the middle of the year, it is demonstrating a vibrancy and dynamism that will continue to drive it forward.

This is good news for both overseas and local investors, as superb opportunities exist in the market for buyers to achieve healthy capital gains and solid rental returns.

The research that we have completed provides detailed evidence of these trends and highlights a property market that not only has a strong competitive advantage over its regional competitors but one that is maturing fast.

Our analysis draws on a wide range of factors to present a balanced, realistic survey of current market conditions. It examines new project launches in the context of annual and cumulative unit sales, price per square metre, location, takeup rates at projects under construction and completed transfers. It also employs economic indicators to provide a more precise outlook for 2008.

While providing insight for investors and buyers, what it most clearly demonstrates is that Thailand remains a growing market with huge scope for further growth. (This is the second in a series of four articles that draws on research by Raimon Land contained in ‘Condominium Focus Thailand: Update of Inner-city Bangkok and Key Resort Areas’. To reserve a copy, e-mail: research@raimonland.com or download at www.raimonland.com)

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Real Estate scores over Bank deposits

Developer’s research indicates higher returns even after factoring in inflation

At a time when fixed deposits earn interest at only 2.5 per cent, property companies and agencies suggest buying residential property located close to the masstransit system – an investment that can generate a return of 7 per cent to 100 per cent.

The returns will depend on the term of the investment.

According to research by CB Richard Ellis Thailand, resale prices for residential projects located close to the mass-transit system and the Central Business District from the Asoke intersection to Soi Thong Lor range between Bt110,000 to Bt130,000 per square metre. This shows an increase of between 37.5 per cent and 62.5 per cent from Bt80,000 to Bt90,000 per square metre last year.

The rental price for serviced apartments in Silom and Sathorn has shown a strong rise from Bt289.5 per square metre in 2004 to Bt399 per square metre this year, a jump of 33.7 per cent. The Sukhumvit area is a close second with rents rising from Bt280.5 per square metre in 2004 to Bt365 per square metre, a rise of 30.1 per cent. Central Lumpini now commands rents of Bt360.5 per square metre, a rise of 18.6 per cent from Bt304 per square metre in 2004.

The demand for residential properties in the Central Business District is coming from foreigners who work in Bangkok. The two-bedroom type unit, with covered area falling between 90 and 130 square metres, has seen the strongest demand.

Residential projects at resort destinations such as Phuket, Koh Samui and Hua Hin have also seen strong demand. Investors buying property at these locations can expect a return on investment at an average of 7 per cent a year. If they sell the property within one or two years, they can expect a significant return on investments, CB Richard Ellis Thailand managing director Aliwassa Pathnadabutr said.

Kasikornbank’s first senior vice president Chatchai Payuhanaveechai said if one has the money to buy a property at a good location close to the mass-transit system, one can expect returns of 7 per cent to 8 per cent a year. This is much better than making a long-term deposit in the bank, which earns only 2.5 per cent. When adjusted with inflation – presently at 6.2 per cent – the return is negligible.

Chatchai said if there is no ready cash to buy a property, investors can apply for a mortgage loan. This will generate higher returns if the investor selects the best location.

For example, if an investor buys a property at a price of Bt100,000 per square metre, the monthly payment on a mortgage loan comes to Bt56,000 a month. Investors can earn Bt50,000 a month by renting out the property. That will help generate money for the monthly instalment.

Chatchai said the property should be located close to the mass-transit routes or a main road which will allow for an easy commute. Such properties are easier to sell and rent out.

Harrison executive vice president Kitisak Jampathippong said residential properties on Sukhumvit Road now sell for Bt100,000 per square metre, signifying a rise of between 30 per cent and 60 per cent from last year. The frequency of resale of residential properties on Sukhumvit Road averages at two or three times a year. Resale prices are expected to rise between 10 per cent and 20 per cent each time, he said.

At a time of high inflation and low interest rates, Kitisak said buying residential properties is a good investment choice. However, investors must study the value of the property.

“An investor has to select the project that has lots of facilities and offers an easy commute. That does not mean the project has to be located close to the mass-transit system alone. If the project is located close to a main road or expressway, it is still a good location, especially if the project offers good facilities and a good environment for buyers,” Kitisak said.

SOMLUCK SRIMALEE THE NATION

LUMPHINI PARK IN BANGKOK
Bangkok

Koolpuntville eyes bangkok condo market

LUXURY HOUSING

Chiang Mai property developer Koolpuntville Group this year plans to launch its second new residential project in Bangkok, worth up to Bt1 billion. The developer has already completed its first residential project, Belgravia Residences, worth Bt1.7 billion and has made sales amounting to 60 per cent of the project value.

Koolpuntville Group president Sompak Trakarnkoolpunt said the new residential project would be a luxury condominium located on Rama III Road. The building will rise to either 18 or 19 floors and prices will range from Bt85,000 to Bt90,000 per square metre.

"We have continued to expand our investment in Bangkok because we see strong demand for residential projects, especially luxury condominiums. Now we are considering whether to invest ourselves or with a partner. That will be finalised in the second half of this year," Sampak said.

Earlier, the developer set up a joint-venture firm, Pakporn, with UK-based First Oriental Investment, a subsidiary of Libra Holding, with a registered capital of Bt200 million to develop Belgravia Residences.

The luxury Belgravia Residences on Sukhumvit Soi 30/1 offers 48 luxury-condominium units starting at Bt38 million each.

"Demand for luxury residences at Sukhumvit Soi 30/1 has shown strong growth and we have adjusted the selling price from Bt127,000 to Bt135,000 per square metre. That drives our project value from Bt1.7 billion to Bt2 billion," Sompak said.

He added that the company believed that the rest of the total project value would be recovered in the second half of the year.

The Koolpuntville Group was established by Pramarn Chansue in 1987. It is now the largest property developer in Chiang Mai, with 12 residential projects worth up to Bt20 billion. It also has a land bank of 2,000 rai in Chiang Mai, Chiang Rai and Lampang. The group announced sales of Bt1.3 billion last year and expects Bt1.2 billion this year.

At present, the company has two property projects in Chiang Mai and plans to launch three new residential projects worth Bt1.1 billion in Chiang Mai, Chiang Rai and Lampang next year.

By Property Reporters
The Nation
Published on May 12, 2008

Cash-rich buyers keep luxury real estate market healthy

Cash-rich buyers keep luxury real estate market healthy

The luxury property market is still strong due to healthy demand and high purchasing power, reflected in the fact that fewer than 20% of purchasers seek loans, according to Chatchai Payuhanaveechai, a senior vice-president at Kasikornbank.

Most buyers of luxury units pay cash as they are seeking better returns than from bank deposits in the face of inflation that is hovering around 6%, he said.

Yields on bonds and debentures are also seen as unattractive and stocks are too volatile, while prime real estate can bring rental returns of 5-8% per year.

‘‘You need to know the real estate market and each asset’s liquidity. Choosing a good location is the key,’’ Mr Chatchai said.

Developers of luxury units are offering more than 7,000 units at 24 projects in an exhibition taking place until May 18 at Siam Paragon, while three property brokerage firms are looking for combined sales of 2.75 billion baht.

Aliwassa Pathnadabutr, managing director of the property consultancy CB Richard Ellis (Thailand), said demand in the segment remained healthy.

Unit prices have been increasing at between 7% and 15% a year depending on the project and location, while units at the very top end of the market can fetch nearly 300,000 baht per square metre, she said.

Sixty percent of luxury property buyers are Thais and 40% are foreigners, up from 15-20% in the past, according to CBRE.

‘‘Confidence is a major factor affecting decision-making and demand in this segment,’’ Ms Aliwassa said.

CBRE is selling six projects worth a combined 15 billion baht and hopes the exhibition would generate sales of two billion baht. At a similar event last year, the company generated 800 million baht from five projects.

Harrison, another participating real estate brokerage, expects sales of 600 million baht from eight projects where it has four billion baht worth of units on offer.

Phanom Kanjanathiemthao, managing director of the property agency Knight Frank Chartered (Thailand), said his company was selling three projects worth 10 billion baht and expected to sell 40 to 50 units worth 150 million baht, up from 50 million baht from a single project in the 2007 showcase.

One of the three projects is the 400-unit My Resort condominium worth two billion baht at the Phetchaburi-Asok Junction, being developed by Everland. After a month of pre-sales, 20 units worth 100 million baht have been sold.

‘‘Demand in the high-end segment is strong but prices are up 20-30% due to higher costs of construction and land. Developers needed to increase their marketing budget as sales slowed down last year,’’ Mr Phanom said.

According to the company’s research, average prices of Bangkok condominiums have risen from 65,000 baht per sq m to 82,000 baht in the past year. New condominiums in Hua Hin are fetching 120,000 baht per sq m, up from 85,000 baht, as construction costs are 10-15% higher and land prices in the resort town have risen 20-30%.

Somchao Tantaterdtham, president of the Thai Real Estate Association, said transfers of residential units during the first two months of 2008 increased from the same period last year due to higher confidence among consumers.

Significantly, transactions were up even though new tax incentives approved by the government did not take effect until late March.

Transfers of single houses and townhouses totalled 1,200 units in January and 1,167 in February, up from 903 and 1,150 units respectively in the same two months last year.

Condominium unit transfers totalled 973 units in January and 888 in February, up from 616 and 759 respectively in January and February 2007.

‘‘Risks remain. Higher oil prices affected overall construction costs while steel prices never go down. Under such circumstances, the government should support building the investment atmosphere,’’ Mr Somchao said.

KANANA KATHARANGSIPORN

Raimon Land views about market

RAIMON RAISING BT1.3 BN TO COMPLETE PROJECTS

Obtaining loans for property projects has been near impossible since the US sub-prime meltdown shook up global banking recently, but Thailand is one of the very few exceptions, Raimon Land CEO Nigel Cornick said yesterday.

“For many foreign buyers, Thai properties are still regarded as highly undervalued,” he said.

“As banks everywhere are taking a cautious stance with the US fallout, Raimon Land has decided to raise fresh funds from the stock market,” said Cornick.

The company will hold a rights issue of two old shares for one new one to raise Bt1.3 billion to complete half a dozen projects.

The firm goes ex-rights (XR) next Tuesday, but Cornick said the stock is now trading at a discount because of poor sentiment for the real-estate sector.

“We will use the cash to complete key sites such as the 11- rai River project on the Chao Phya River, overlooking the Shangri- La and Oriental hotels,” he said.

Its other prestigious site includes 185 Rajdamri, a 6- rai estate where the Cambodian embassy was formerly located, and Northpoint, a twin-tower project in North Pattaya.

Much of the capital raised in the current exercise will actually come from existing shareholders, Cornick noted, as Kuwait’s IFA Hotels and Dubai’s Istithmar Group each hold about 25 per cent of the firm

“Only about 20 per cent of the shares are freely floated,” he said.

Cornick expects the new rights to be fully subscribed, as the two Gulf state companies and major shareholders are ready to inject cash into what is widely regarded as Thailand’s premium property developer.

He expects the new shares to be a t t r a c t i v e , based on the results of two separate surveys the company recently c o n d u c t e d through independent agencies to establish its share value.

“ The estimates range from Bt1.70 to Bt1.90, which is higher than the current market price of about Bt0.90,” he said.

On a recent visit to Singapore, Cornick said a group there with US$300 million ( Bt9.5 billion) to invest had indicated to Raimon Land that it was keen to form ventures to develop projects in Thailand.

Echoing this sentiment is Ananda Development’s CEO Chanond Ruengkritya, who said its European partner Primeamerica and other funds all indicated they were keen to invest in Thailand as it could provide solid returns with minimal risk.

“ The general view of the global financial sector is that Thailand remains one of the few markets capable of delivering a decent return,” said Cornick. “ This is different from the grimmer picture in many Asian markets that have been reeling from a post-bubble implosion.”

Observers note that Thailand is in a very special position because, as a net food exporter, it is gaining from the run in commodity prices. This gives it a solid buffer at a time when Asian food importers are facing a crisis. Its economy is therefore seen as being able to weather the financial storm much better than those of pure service economies such as Hong Kong and Singapore.

Sheltering Raimon Land’s projects is its strict adherence to build only in the city centre and other prime locations.

Raimon Land marketing chief Henri Young said: “ The River continues to book Bt150 million worth of sales a week. More than half the project, estimated to be worth Bt12 billion, has been sold.”

Real estate is not the flavour for banks these days, said Cornick. But there is also the belief lightning does not strike the same place twice.

The 1997- 1998 stock and property crash was Thailand’s worst. Property only started to recover about six years ago. It is therefore not likely to see a repeat of the kind of housing crash that is now ripping through the US and other markets where property bubbles formed over the past few years.

Crystal Design Centre

KE LAND MAKES A BIG MOVE INTO RETAIL BUSINESS

Crystal Design Centre will highlight furniture and home decorative items

KE Land Group yesterday signed a Bt1-billion contract for construction company EMC to build the Crystal Design Centre as part of the real-estate developer’s expansion into the retail business.

Managing director Kaveepan Eiamsakulrat said the project would be the first one-stop service design centre in the country for brand-name furniture and home decorations.

Strategically located between Lat Phrao and Kaset- NavamIndra roads, the project covers 70 rai of land stretching 370 meters along PraditManutham Road (Ekamai-Ram-Indra expressway) with a total showroom area of 100,000 square metres and parking for 1,500 vehicles.

The centre’s first of two phases will accommodate more than 150 outlets showcasing top quality furniture and decorative items from both international and local suppliers. The accessories will range from lamps and chandeliers, tapestries and tiles to sanitary ware.

The property will also serve as a complete business and resource centre for home decorative design, with a comprehensive library, meeting rooms and a large exhibition hall fully equipped with state-of-the-art facilities.

Its main targets include all premium market groups, focusing on general purpose users, such as residences, office buildings, businesses, retail shops, department stores, hotels, architects, landscape architects, interior designers, electrical and system engineers, contractors, developers, importers, exporters, expatriates and students. The centre has already secured prestigious tenants such as Siam Cement Group – with the SCG Life Style Centre costing more than Bt400 million – and SB Furniture, with its Bt300 million, 10,000-squaremetre SB Design Square offering a complete line of furniture.

When the centre opens next March, it is expected to receive a warm welcome as well as much interest from its target groups, since all products and services are already well-known and popular in the market. The centre will help add to the flavour by giving its offerings “the final touch of perfection”, Kaveepan added.

Luxury Condo Market

ASIAN PROPERTY EYES LUXURY CONDO MARKET

revenue estimate based on demand for detached-house projects

Property firm Asian Property Development is studying the market with a view to expanding its business to luxury condominiums. It wants to develop units with a price range of Bt7 million to Bt10 million, reacting to the strong demand in the market, the company chief executive Anuphong Assavabhokhin said.

The company has also revised its revenue estimate from Bt8 billion to Bt9 billion for this year, given the strong demand for detached-house projects following the government’s tax stimulus package.

Anuphong said demand for city and luxury condominiums still holds growth potential especially for projects near the Central Business District and the mass-transit system.

Consequently, the company is looking for the best location to develop a luxury condominium-project which is suited to the existing customer demand.

“Before we launch our new product, we have to research the customer profile, the kind of product that meets our customer’s demand and how much our customer can pay,” he said.

As of now, the company has five brands that focus on the middlemarket segment for town-house and condominium developments.

The town-house brands include Baan Klang Muang – priced between Bt3 million and Bt4 million per unit – and Baan Klang Krung – average price Bt5 million per unit. The three condominium brands include The Life, in which pricing is between Bt2 million and Bt3 million per unit; The Address, average price Bt5 million; and The City with an average price of Bt5 million per unit.

Anuphong said the company has revised its pre-sales target for the year from Bt15 billion to about Bt17 billion for this year.

“We believe that our pre-sales figures will meet the new target after the first quarter of this year. Our sales growth has been 15 per cent higher than our estimate for detachedhouse and town-house projects in the first quarter,” he said.

The company has projects which garnered pre- sales Bt17.55 billion last year. This figure will reflect in the company’s revenues for this year to 2010.

The company also set aside an investment budget of Bt3 billion to buy land that it will develop next year. This sum is expected to come from the company’s cash flow.

The company will launch 13 residential projects this year. Of these, six will be town-house projects valued at Bt3.87 billion, five will be citycondominium projects worth Bt8.38 billion and two will be detachedhouse projects.

Asian Property Development posted a revenue of Bt7.87 billion and a net profit of Bt898.83 million last year.
SOMLUCK SRIMALEE THE NATION

Fire Sale (Bids Open)

Developer invites bids for assets near mass-transit system

FIRE SALE

Harrison has today opened biding for its assets including undeveloped land, an office building, serviced apartments and apartments – a total of 26 items worth about Bt2.5 billion.

Most of the assets are located close to the mass-transit system in areas such as Sukhumvit, Phahonyothin, Ratchada and Petchburi.

People interested in bidding for the assets can visit the company’s website at www.harrison.co.th

The company also plans to organise the Thailand Investment Property Exhibition this year – part of an effort to promote the resale market, the company’s vice president Kittisak Jampathipphong said. – The Nation

Financial institutions raise cash in Asia Pacific

Buyers’ market for property
Financial institutions with sub-prime problems are looking to raise cash in Asia Pacific, reports Nina Suebsukcharoen
Financial institutions hurt by the credit squeeze in the US and are unable to get fresh funds as refinancing deadlines approach are selling assets across the region, turning it from a sellers’ to a buyers’ market in just six months, says Robert McKeller, the CEO for Asia Pacific of the property firm Savills.

Aside from Australian funds selling their real estate, those in Japan, Hong Kong and Singapore are also doing so, he said in a recent interview in Bangkok. ‘‘Savills has never had so many instructions to sell.’’

Wealthy individuals are benefiting from this trend, some re-entering the market after having obtained handsome profits from selling properties to these funds two to three years earlier.

Savills recently sold the Trade Square building in Hong Kong to a private buyer for HK$1.518 billion, or approximately US$200 million, the biggest deal in the territory this year.

‘‘They (private buyers) are making a big, fat profit and what you are seeing in Japan, Australia and other parts of Asia where some of the American funds that are highly leveraged . . . may be forced to sell and sell at a price that maybe they otherwise would not have wanted to sell at, say, six months or a year ago,’’ said Mr McKeller.

The discount in a forced sale was typically around 20%, he added.

Real estate prices in the US have also come down by more than 10%, and the country is unlikely to work its way out of its problems in six to 12 months as some optimistic commentators have said.

‘‘There was a study done saying that it may take up to 2017 before prices come back to anywhere what they were like in the last year,’’ he said.

There is also a major difference, he says, between previous recessions and the one the US is now entering. ‘‘The previous recessions . . . have been corporate-led recessions that have been quick, short and sharp. You clean out some of the defaulters, the companies that have gone bust, that haven’t performed, fine.

‘‘But this is a consumer-led recession based on the fact that the value of their homes and equity has come down and that . . . won’t won’t go away in six to 12 months.’’

The UK is also looking very difficult with real estate prices down.

Mr McKeller mentioned a recent article in The Times which said that 40,000 jobs would go in the City of London financial markets this year.

Asia cannot escape because the theory about Asia ‘‘decoupling’’ with the US is questionable when one realises that 60% of the region’s exports go to G8 countries.

‘‘Having said that, there is still so much money in Asia — the sovereign wealth funds, the Chinese, the Singaporean, the Taiwanese and Middle Eastern money coming, those who have cash and don’t rely on debt are still looking to buy real estate,’’ said Mr McKeller.

‘‘It’s a very interesting situation because you have a lot people who are being forced to sell because of financing, the cost of debt, they can’t get financing or interest is getting more expensive, and those who are waiting with cash are waiting for prices to fall even further before they buy, so this is a little bit of a stalemate. Hopefully that will soon pass and we will see more transactions in the marketplace.’’

While the outlook is for the region to turn into a buyers’ market, there are pockets that buck the trend, Taipei among them.

The Taiwanese government’s warmer stance toward China, which has led to direct flights being started, has boosted property transactions. Tokyo too is looking robust despite the fact that the Japanese economy has been stagnant for years. Savills is not seeing a major shift in prices there except for sales by heavily leveraged Americans.

‘‘Most of the Japanese real estate is held by Japanese funds and Japanese companies and they don’t trade assets, they keep them for generations.’’

Another pocket is Thailand which has not seen overall prices increase at the pace they did in Hong Kong and Singapore in the past two to three years.

Robert Collins, Savills’ chief in Thailand, said Thai banks did not have significant exposure to the sub-prime crisis and therefore local lending had not had a direct impact and this was one of the reasons prices are not softening here.

‘‘Also, on the back of tourism, the overall residential market is still holding up very well,’’ said Mr Collins. ‘‘Private investment is still very good generally speaking, there is a lack of stock and supply that is investment grade but overall the sentiment still remains quite positive.’’

While real estate developments are still taking place in China, financing is getting difficult there too with the government placing some curbs on lending to cool the market.

‘‘We have been advising some sovereign wealth funds, Middle East buyers about . . . co-investing with Chinese developers who need money, otherwise the developments they are working on will not happen,’’ says Mr McKeller.

Hong Kong residents are among those eagerly waiting for lower prices because they can borrow at 2.5% a year.

Meanwhile, Singapore, where property prices soared over the past few years, is going through very testing times.

Mr McKeller cited research showing that luxury property prices will fall by 18% this year followed by 10% and 15% respectively in the following years.

‘‘In Singapore we advise them that for those blocks with luxury residential, you’re going to have to look at 10, 15, or 20 percent reductions in the sales price if you want to get that stock away. If you want the sales, forget about last year’s prices. It’s a different market and you are going to have to drop your prices.’’