New condo launches likely to fall 25%
Plus planning 10 projects worth B4bn
New condominium launches this year are likely to drop by 25% from 2007 due to higher competition in the market and rising construction costs, says Mayta Chanchamcharat, chief executive officer of the developer Plus Property Co. New condo units would total less than 30,000, down about 25% from last year. But demand remains strong as consumers are concerned more with travel expenses because of high fuel prices.
''We have seen signs of a slowdown since last year. Many small and medium-sized developers faded from the market, while the remainder were selling already launched units rather than opening new projects as financial institutions had stricter rules. Most new launches were from large developers,'' said Mr Mayta.
The take-up rate last year was 70-80%, which was solid but still down when compared to the levels in 2005-06. Some projects sold out within a few months, while some needed four to five months to sell 80-90% of the units.
According to Plus Property's research, 119 new condominium projects were launched last year in Bangkok with 39,341 units, up 42% from 2006. About 17,000 units from 61 projects were launched in the first half, while around 22,000 units from 58 projects were launched in the second half.
The figures indicated that newly launched projects in the second half had more units in each site, but smaller unit sizes as developers tried to offer lower-priced units to match lower purchasing power, said Mr Mayta. Some projects sold for 600,000 baht a unit, or as low as 20,000 baht per square metre.
About 70% of launches this year would be condominiums, as sales depend on confidence in the economy, interest rates and living expenses.
Last year the top zone for new launches was the Thon Buri area, where the new BTS extension is under construction. It was followed by Ratchada-Lat Phrao, Phahon Yothin, Sukhumvit and the central business district, respectively. All are close to mass-transit lines.
Plus Property, a subsidiary of the listed developer Sansiri Plc, plans to launch at least 10 projects worth a combined four billion baht this year. They would comprise five townhouse projects and five condominium projects.
Last year the company acquired four land plots for new projects, some of which will be located on Phahon Yothin Road near the BTS, Mr Mayta said. It also planned to spend two billion baht to buy more plots.
The new launches this year would include new townhouse brand Home+ to tap the lower-end segment as unit prices would start at 2.5 million baht. It will launch a new townhouse brand for a higher segment than Town+, as well as a new condo brand that would appeal to richer customers than My Condo.
Currently, the company has three housing brands: Town+ for townhouses priced between 2.8 million and three million baht a unit; My Condo and Condo One with prices starting at 50,000 baht a square metre; and sub-brand Condo One X tapping the lower-end segment.
Due to higher construction costs, which are expected to increase about 6-8%, condominium developers should shift to pre-fabrication and precast construction technology to reduce construction time by 10% and save overall costs.
Mr Mayta said prefabrication would be used in building structures, while precast would be used for walls. These methods, which cost 10-15% more than conventional methods, would help speed up completion and reduce the reliance on labour, as construction workers are in short supply and wages are rising.
KANANA KATHARANGSIPORN
Wednesday, January 16, 2008
Sunday, January 13, 2008
Property Market (Bangkok)
The condominium and industrial sectors were the best performers in the Bangkok property market in 2007, according to the leading international property consultants CB Richard Ellis.
Medium priced condominiums continued to attract a new generation of purchasers in locations near mass transit stations. Luxury condominiums in the downtown area performed well with prices of newly launched projects increasing. Industrial properties were the other star performer, with 40% increase in land sales in the first nine months of 2007 and rental factories attaining high occupancy rates in 2007.
The office and retail markets were slow due to weak domestic demand. Bangkok hotels suffered lower-than-average occupancy rates. There was a 22.7% drop in the number of developer-built single-detached houses completed and a 15.7% drop in developer-built townhouses completed in the first six months of 2007.
According to Ms. Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis Thailand, in 2008, the prospects for office property will principally rely on the economic prospects after the election and the new government’s policies. There is latent demand for houses in good locations shown by high sales rate for new projects launched this year. The completion of the final section of the outer ring road will provide new areas for future residential development. There will also be more housing projects along the Airport Rail Link, which is scheduled to be opened next year or early 2009.
“Condominium prices in the downtown area will continue to rise next year. Prices of newly launched condominiums in mid-town locations will increase at a slower rate as end-users tend to choose newly completed condominiums rather than condominiums sold off-plan. The market for serviced apartments in downtown Bangkok will be competitive since there will be a number of new serviced apartments due for completion next year. The luxury hotel market in Bangkok will perform well next year if there are no more security issues in Bangkok. The market for industrial properties looks bright as the government’s eco-car policy has already started to spur transaction activities,” added Ms. Aliwassa.
Housing Market
The housing market was weak with 7,054 developer-built single-detached houses completed in the first six months and 4,560 developer-built townhouses, representing 22.7% drop and 15.7% drop, respectively. The total new residential supply is expected to drop by about 20% in 2007, compared to that of 2006.
For 2008, the completion of the Outer Ring Road has opened a new area for development that will now have convenient access to the city centre. Consumer confidence will be critical to the performance of the housing market next year.
Condominium Market
The overall performance of condominium market sector was outstanding given the unfavourable economy throughout the year. Completed downtown supply reached 50,000 units in the third quarter of this year and will be about 52,600 units at the end of the year. Occupancy rates of existing condominiums in the downtown area have been increasing steadily throughout the year to about 87% at present.
The average price of grade A condominiums rose from 110,000 baht per square metre in the first quarter to about 123,000 baht per square metre, and is expected to be over 126,000 baht per square metre by the end of 2007, rising by about 12% from the beginning of the year.
The emerging “Skytrain” generation and the changing lifestyle of city dwellers have been key drivers for the mid-range condominium market in secondary locations. The mid-range condominium market, mostly priced between 65,000 – 80,000 baht per square metre, has been active throughout the year. 1,656 mid-range units will have been completed in downtown Bangkok in 2007, representing a 13.4% increase y-o-y. In the next few years, more than 2,800 new units are expected to be completed in this segment in downtown Bangkok.
There will be approximately 8,700 new units due to be completed in 2008 as opposed to about 6,300 completed units this year. The majority of future supply will be concentrated in the Sukhumvit and Riverside/Rama III areas, followed by Pathumwan, Silom/Sathorn, and Central Lumpini. “CB Richard Ellis remains confident about the downtown luxury condominium market. We are still seeing strong demand from both Thai and foreign buyers,” said Ms. Aliwassa.
Expatriate Rental Apartment Market
The expatriate apartment market continued to perform well despite a 6.6% increase in supply and completion from rental units in condominiums. The average occupancy is likely to drop slightly from 89% last year to about 86% by the end of this year.
The number of expatriates with work permits in Bangkok grew to 71,401 in August 2007, a 9.3% increase from last year.
The average achieved rents for grade A apartments dropped in all areas by 2-8% while average achieved grade B rents managed to increase slightly during the year.
CB Richard Ellis expects that the apartment sector will perform well in 2008 provided that the number of expatriates continues to grow. The apartment supply in the downtown area is expected to rise slowly at a rate of about 3% next year, while the number of expatriates is likely to increase at a faster rate in 2008. The average rental rate may be stable in the short term as housing allowances are not being increased. Rentals of new and newly renovated apartments, however, could push up the average rent in the longer term.
Serviced Apartment Market
The total supply of serviced apartments will reach 10,756 units at the end of this year, increasing by 21.6% y-o-y. Demand, however, was weak due to political instability and the sluggish economy. Demand from tourists also slowed. The average occupancy rate is expected to drop to about 79% for 2007 compared to 83% recorded last year. The average achieved rent has increased only slightly this year by about 1%.
The increase in supply will continue to put more pressure on rents and occupancy rates. There will be more than 2,000 new units completed in 2008. The pressure from the supply side together with the current weaker-than-average demand could limit increases in occupancy and rental rates next year unless demand increases. We will see more serviced apartments targeting daily guests to help maintain their revenues.
Office Market
The Bangkok office market has witnessed delayed expansion and few new start-ups this year due to a weak economy, political uncertainty and concerns about foreign ownership of companies. The total net new take up in the first nine months of the year was 122,000 square metres and CB Richard Ellis expects that the total for the whole of 2007 will be only around 150,000 square metres. This will be 26.5% less than 2006 and 50% of the average annual take up between the years 2000 and 2005. Rents increased only by 2.2% in 2007 for grade A CBD offices. The total office stock at the end of 2007 will stand at 7.47 million square metres, increasing by 150,000 square metres this year.
The office market in 2008 will rely on latent demand from multi-national companies which could rebound quickly once the policy direction toward foreign investment becomes clear. CB Richard Ellis believes that if there is a more overseas investor friendly policy and a democratic government, investor confidence will be restored which will boost the office market next year. There will be at least 165,000 square metres of new supply in 2008, including the 90,000-square-metre Chamchuri Square on Rama IV, the 45,000-square-metre Interchange 21 at the Sukhumvit-Asoke junction.
Retail Market
The market for retail property has been slow for much of 2007, due mainly to the weak economy. The total supply of retail space in Bangkok will grow by 4.9% y-o-y at the end of 2007. Although demand was weak, the average occupancy rate remained well over 90% for all of 2007. The slowing market made it difficult to increase rentals in most retail centres this year. Total retail sales were flat.
More developers are building community malls. Tesco Lotus and CPN also plan a strategic move into community mall development. There will be at least seven new community malls in Bangkok by the end of 2008. The change in consumer lifestyle to shop near their residence has encouraged more community mall developments. The proposed retail and wholesale law if passed and implemented will restrict future retail property development.
Industrial Property Market
2,611 rai (1,044 acres) of Serviced Industrial Land Plots (SILPs) were sold in the first nine months of 2007, a 40% increase on the same period in 2006. The market for Ready-built Factories (RBFs) has been performing well throughout the year, with 86% occupancy rate. Like the SILP market, Japanese businesses continued to be the major tenants for the RBF market.
The market is expected to be active in 2008. With the total value of the Board of Investment (BOI)-approved projects increased by 99% y-o-y in the first three quarters of 2007, CB Richard Ellis is looking forward to more transactions in 2008. New supply of SILP of about 3,251 rai at the end of this year is expected to be quickly absorbed by the rising demand. The eco-cars are likely to be the next driver of the automotive sector, spurring the industrial property market in 2008. Favourable investment policies of the new government will be crucial to carry on the momentum into next year.
Hotel Market
The overall performance of upscale hotels (luxury and first-class hotels) in Bangkok was weak throughout the year 2007. Hotels in resort destinations, such as Phuket and Koh Samui, outperformed their peers in Bangkok. The average occupancy rate of upscale hotels in Bangkok is expected to be only 70% by the end of year 2007, compared to 75% in 2006. Although the Average Daily Rate (ADR) increased 12.1% y-o-y in dollar terms to US$158 in Q3 2007 and is likely to reach US$170 by the end of this year, the increase was only about 2% in Baht terms.
CB Richard Ellis forecasts that more than 2,000 new upscale hotel rooms in Bangkok will be completed in 2008, raising the supply by 24% from 2007. Competition will be intense if demand does not recover from this year’s level. Resort hotels in tourist destinations will continue to perform well as the number of tourist arrivals continually increases.
CB Richard Ellis remains confident about the Thai resort property market having expanded the Phuket office and opening offices in Koh Samui and Pattaya in 2007. Restrictions on foreign ownership are still challenging as almost all demand in resort locations is from foreigners. CB Richard Ellis hopes that a newly elected government will look at increasing the foreign quota for condominiums, a 99 year lease and permitting foreign buyers to borrow money locally to fund property purchases.
CB Richard Ellis Thailand : 12 December 2007
Medium priced condominiums continued to attract a new generation of purchasers in locations near mass transit stations. Luxury condominiums in the downtown area performed well with prices of newly launched projects increasing. Industrial properties were the other star performer, with 40% increase in land sales in the first nine months of 2007 and rental factories attaining high occupancy rates in 2007.
The office and retail markets were slow due to weak domestic demand. Bangkok hotels suffered lower-than-average occupancy rates. There was a 22.7% drop in the number of developer-built single-detached houses completed and a 15.7% drop in developer-built townhouses completed in the first six months of 2007.
According to Ms. Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis Thailand, in 2008, the prospects for office property will principally rely on the economic prospects after the election and the new government’s policies. There is latent demand for houses in good locations shown by high sales rate for new projects launched this year. The completion of the final section of the outer ring road will provide new areas for future residential development. There will also be more housing projects along the Airport Rail Link, which is scheduled to be opened next year or early 2009.
“Condominium prices in the downtown area will continue to rise next year. Prices of newly launched condominiums in mid-town locations will increase at a slower rate as end-users tend to choose newly completed condominiums rather than condominiums sold off-plan. The market for serviced apartments in downtown Bangkok will be competitive since there will be a number of new serviced apartments due for completion next year. The luxury hotel market in Bangkok will perform well next year if there are no more security issues in Bangkok. The market for industrial properties looks bright as the government’s eco-car policy has already started to spur transaction activities,” added Ms. Aliwassa.
Housing Market
The housing market was weak with 7,054 developer-built single-detached houses completed in the first six months and 4,560 developer-built townhouses, representing 22.7% drop and 15.7% drop, respectively. The total new residential supply is expected to drop by about 20% in 2007, compared to that of 2006.
For 2008, the completion of the Outer Ring Road has opened a new area for development that will now have convenient access to the city centre. Consumer confidence will be critical to the performance of the housing market next year.
Condominium Market
The overall performance of condominium market sector was outstanding given the unfavourable economy throughout the year. Completed downtown supply reached 50,000 units in the third quarter of this year and will be about 52,600 units at the end of the year. Occupancy rates of existing condominiums in the downtown area have been increasing steadily throughout the year to about 87% at present.
The average price of grade A condominiums rose from 110,000 baht per square metre in the first quarter to about 123,000 baht per square metre, and is expected to be over 126,000 baht per square metre by the end of 2007, rising by about 12% from the beginning of the year.
The emerging “Skytrain” generation and the changing lifestyle of city dwellers have been key drivers for the mid-range condominium market in secondary locations. The mid-range condominium market, mostly priced between 65,000 – 80,000 baht per square metre, has been active throughout the year. 1,656 mid-range units will have been completed in downtown Bangkok in 2007, representing a 13.4% increase y-o-y. In the next few years, more than 2,800 new units are expected to be completed in this segment in downtown Bangkok.
There will be approximately 8,700 new units due to be completed in 2008 as opposed to about 6,300 completed units this year. The majority of future supply will be concentrated in the Sukhumvit and Riverside/Rama III areas, followed by Pathumwan, Silom/Sathorn, and Central Lumpini. “CB Richard Ellis remains confident about the downtown luxury condominium market. We are still seeing strong demand from both Thai and foreign buyers,” said Ms. Aliwassa.
Expatriate Rental Apartment Market
The expatriate apartment market continued to perform well despite a 6.6% increase in supply and completion from rental units in condominiums. The average occupancy is likely to drop slightly from 89% last year to about 86% by the end of this year.
The number of expatriates with work permits in Bangkok grew to 71,401 in August 2007, a 9.3% increase from last year.
The average achieved rents for grade A apartments dropped in all areas by 2-8% while average achieved grade B rents managed to increase slightly during the year.
CB Richard Ellis expects that the apartment sector will perform well in 2008 provided that the number of expatriates continues to grow. The apartment supply in the downtown area is expected to rise slowly at a rate of about 3% next year, while the number of expatriates is likely to increase at a faster rate in 2008. The average rental rate may be stable in the short term as housing allowances are not being increased. Rentals of new and newly renovated apartments, however, could push up the average rent in the longer term.
Serviced Apartment Market
The total supply of serviced apartments will reach 10,756 units at the end of this year, increasing by 21.6% y-o-y. Demand, however, was weak due to political instability and the sluggish economy. Demand from tourists also slowed. The average occupancy rate is expected to drop to about 79% for 2007 compared to 83% recorded last year. The average achieved rent has increased only slightly this year by about 1%.
The increase in supply will continue to put more pressure on rents and occupancy rates. There will be more than 2,000 new units completed in 2008. The pressure from the supply side together with the current weaker-than-average demand could limit increases in occupancy and rental rates next year unless demand increases. We will see more serviced apartments targeting daily guests to help maintain their revenues.
Office Market
The Bangkok office market has witnessed delayed expansion and few new start-ups this year due to a weak economy, political uncertainty and concerns about foreign ownership of companies. The total net new take up in the first nine months of the year was 122,000 square metres and CB Richard Ellis expects that the total for the whole of 2007 will be only around 150,000 square metres. This will be 26.5% less than 2006 and 50% of the average annual take up between the years 2000 and 2005. Rents increased only by 2.2% in 2007 for grade A CBD offices. The total office stock at the end of 2007 will stand at 7.47 million square metres, increasing by 150,000 square metres this year.
The office market in 2008 will rely on latent demand from multi-national companies which could rebound quickly once the policy direction toward foreign investment becomes clear. CB Richard Ellis believes that if there is a more overseas investor friendly policy and a democratic government, investor confidence will be restored which will boost the office market next year. There will be at least 165,000 square metres of new supply in 2008, including the 90,000-square-metre Chamchuri Square on Rama IV, the 45,000-square-metre Interchange 21 at the Sukhumvit-Asoke junction.
Retail Market
The market for retail property has been slow for much of 2007, due mainly to the weak economy. The total supply of retail space in Bangkok will grow by 4.9% y-o-y at the end of 2007. Although demand was weak, the average occupancy rate remained well over 90% for all of 2007. The slowing market made it difficult to increase rentals in most retail centres this year. Total retail sales were flat.
More developers are building community malls. Tesco Lotus and CPN also plan a strategic move into community mall development. There will be at least seven new community malls in Bangkok by the end of 2008. The change in consumer lifestyle to shop near their residence has encouraged more community mall developments. The proposed retail and wholesale law if passed and implemented will restrict future retail property development.
Industrial Property Market
2,611 rai (1,044 acres) of Serviced Industrial Land Plots (SILPs) were sold in the first nine months of 2007, a 40% increase on the same period in 2006. The market for Ready-built Factories (RBFs) has been performing well throughout the year, with 86% occupancy rate. Like the SILP market, Japanese businesses continued to be the major tenants for the RBF market.
The market is expected to be active in 2008. With the total value of the Board of Investment (BOI)-approved projects increased by 99% y-o-y in the first three quarters of 2007, CB Richard Ellis is looking forward to more transactions in 2008. New supply of SILP of about 3,251 rai at the end of this year is expected to be quickly absorbed by the rising demand. The eco-cars are likely to be the next driver of the automotive sector, spurring the industrial property market in 2008. Favourable investment policies of the new government will be crucial to carry on the momentum into next year.
Hotel Market
The overall performance of upscale hotels (luxury and first-class hotels) in Bangkok was weak throughout the year 2007. Hotels in resort destinations, such as Phuket and Koh Samui, outperformed their peers in Bangkok. The average occupancy rate of upscale hotels in Bangkok is expected to be only 70% by the end of year 2007, compared to 75% in 2006. Although the Average Daily Rate (ADR) increased 12.1% y-o-y in dollar terms to US$158 in Q3 2007 and is likely to reach US$170 by the end of this year, the increase was only about 2% in Baht terms.
CB Richard Ellis forecasts that more than 2,000 new upscale hotel rooms in Bangkok will be completed in 2008, raising the supply by 24% from 2007. Competition will be intense if demand does not recover from this year’s level. Resort hotels in tourist destinations will continue to perform well as the number of tourist arrivals continually increases.
CB Richard Ellis remains confident about the Thai resort property market having expanded the Phuket office and opening offices in Koh Samui and Pattaya in 2007. Restrictions on foreign ownership are still challenging as almost all demand in resort locations is from foreigners. CB Richard Ellis hopes that a newly elected government will look at increasing the foreign quota for condominiums, a 99 year lease and permitting foreign buyers to borrow money locally to fund property purchases.
CB Richard Ellis Thailand : 12 December 2007
China's economic explosion
China's cities: faster, bigger, better?
The rapid expansion of cities and swelling of urban populations has been the most spectacular feature of China's rapid development
Countless other Chinese cities are determined to follow in Shanghai's steps. Cities have been the engines of China's economic growth, contributing 70% of its annual gross domestic product. But they are also the stage on which China's most intense social and environmental struggles are being played out.
The rapid expansion of cities and swelling of urban populations has been the most spectacular feature of China's rapid economic development over the past two decades. China has become one large construction site: the stock of urban buildings has doubled in a mere five years, reaching almost 15 billion square metres in 2004. In 2005, Shanghai constructed more building space than exists in all the office buildings of New York City. Construction projects in China account for 30% of the global total.
The largest human migration in the history of mankind has been occurring in tandem. China's urban population has grown from less than 20% of the total in 1980 to more than 40% today. A change on the same scale occurred over 120 years in the UK. More than 200 million people have moved to China's cities in tha past 25 years, providing the labour to fuel the country's breakneck economic growth. Urban population growth is expected to continue unabated, reaching 60% of the total population by 2030. In the next two decades China's cities are expected to absorb about 300 million people - equal to the current US population - from rural areas.
To a large extent, this shift has been willed and encouraged by the government. It is straightforward to see why. Simply put, there are too many farmers in the Chinese countryside. The productivity of labour in the agricultural sector is merely one-quarter of that in the service sector and a whopping nine times lower than in industry. To sustain economic growth and achieve its developmental goals, China has little choice but to shift the large pool of surplus rural labour into higher-productivity urban-based jobs.
While a compelling economic logic underpins China's great urbanisation drive, the mounting social and environmental strains it causes cannot be ignored.
As well as providing a ready supply of cheap new labour, urbanisation has added to a growing pool of urban poor. China's 130 million migrant workers are marginalised economically and socially. They are parties to a primitive and unstable social contract that is beyond the protection of the law.
This denies them many rights, including social security guarantees enjoyed by the permanent residents of cities. These people have low pay, unstable jobs and inadequate medical care. They are mostly crammed in to ramshackle "villages" (dormitories) with an average of five square metres of living space per person and often no heat, running water or sanitation facilities.
Urban expansion has meant large-scale conversion of productive agricultural land for urban development. The area occupied by China's cities expanded by 50% between 1998 and 2005. Close to 50 million farmers have been deprived of their land in this way, with only meagre compensation as solace. Land grabs have become the number one cause of protests in China.
Land conversion has in some cases become a major driver rather than a mere symptom of urbanisation. Indeed, the sale of land to developers is an important source of revenue for municipalities - which are not allowed to borrow from capital markets - as well as a source of significant personal enrichment for corrupt local officials. It has been estimated that earnings from the urbanisation of rural land commonly contribute up to two thirds of the revenue of local governments.
As a result, China is repeating the same mistakes that the US had committed, in building sprawling cities that are more suited for cars than for people. Indeed, in some cases, roads are built primarily for the purpose of urbanising land. The ensuing land development is almost always oriented towards the private car and very difficult to serve effectively with public transport. Such mistakes will lock China into a future of rising oil dependence and severe urban air pollution from fuel combustion.
Cities are often built without regard to basic ecological constraints. Beijing has sufficient water resources to sustain a population of about 10 million, yet today it is home to 17 million residents and growing. Scientists warn that the aquifers below the North China Plain may be drained within 30 years. Yet above ground cities are booming and new developments mushrooming like there's no tomorrow.
The pervasiveness of prestige projects is another salient feature of urban wastefulness. Extravagant government offices, outsized piazzas, unnecessary convention centres and expectant central business districts are the norm even in most economically backward areas.
So far, so familiar: most of the aforementioned problems are not unique to China. Where China stands out is in the extent of experimentation with alternative and more sustainable city models.
In the search for solutions to its urbanisation challenges, China has flung its doors wide open to international co-operation. The world's leading engineering, urban planning and design firms are converging in China and the boldest experiments are taking place.
In Huang Baiyu in Liaoning province, a future is being built in which cities function like superior organisms: self-sufficient in energy, with waste streams recycled endlessly. Similarly ambitious and innovative urban concepts and designs are being tested in "eco-cities" in Wuhan, Zhejiang and Shanghai, to name but the most prominent.
China has become a global laboratory of urban change and an incubator of technological, design and policy innovations. Paradoxically, therefore, China's urban mayhem has made it the epicentre of global debate on sustainable urbanisation.
The author is National Co-ordinator for the UK-China Sustainable Development Dialogue, and an Environmental Economic consultant to the World Bank in China. He is also founder and director of EnAct 21, a policy advisory consultancy dedicated to promoting sustainable development through diplomacy. He writes here in a personal capacity and his views do not necessarily reflect those of the UK government or of the World Bank.
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