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.