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.