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.

Condo Focus (May 08)

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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.

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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Phuket’s property market

Opportunities await

Phuket property market has prevailed amid political drift and cautious optimism persists, reports Nina Suebsukcharoen

Not many people want to admit it, but two years of political turmoil have hurt Phuket’s property market, with a lot of money that could have flowed into Thailand going to Vietnam, Malaysia and Bali.

This is especially important to keep in mind as signs of political unrest begin to surface once again.

Tom Travers, managing partner of Indigo Real Estate company, said that while Thailand did see investment during the two-year period, it lost opportunities.

‘‘Bali is busy and as popular as it was before the (year of the) bombing, and the market is very hot,’’ he said.

However, the troubled times did not affect land prices on the island. Mr Travers said they actually went up by 50%. ‘‘So the market in my opinion has been resilient . . . It’s like a lid has been kept on the market in Thailand as a whole, as prices have not really gone down but have risen very little compared to prices in Hong Kong and Singapore and the other neighbouring countries. The cost of a luxury condominium in Singapore versus Bangkok, depending on whether it’s a branded condo, could be five to 10 times as much per square metre.’’

Fortunately the new government’s economic stimulus package reduces the specific business tax from 3.3% to 0.1% and the transfer fee from 2% to 0.01%. ‘‘We have noticed a difference just in the past eight weeks in inquiries, sales and confidence,’’ Mr Travers said. ‘‘Many buyers are still waiting for more positive news from the new government, but the initial announcement, eliminating the land transfer tax, has really put a very positive light on the government.’’

The resort island has also remained unscathed from the credit crunch in the US. ‘‘It hasn’t affected the ability to buy here, as yet we haven’t felt that, certainly not on any scale,’’ he said.

One reason could be that a lot of expatriate buyers in Phuket are based in Asia; Indigo and other major real estate companies typically have just a few North American clients. Also the US economic downturn is actually hitting middle- and lower-middle income people rather than the very wealthy, who are usually the ones drawn to real estate here.

While foreigners do buy homes in the mid-price to lower bracket in Phuket, most are unable to obtain mortgages. This rules out leverage and keeps speculation out of the market.

‘‘There was nervous money going back a year ago,’’ Mr Travers said. ‘‘[Those in the] mid-range market were concerned about the political instability because that’s their nest egg and if anything happened they would be in financial trouble.’’

Regardless of the political and economic situation, those who yearn for a holiday home on a tropical island continue snapping them up. Mr Travers said the hottest projects on the island at the moment are Jumeirah Resort and Spa, which is on a private island 500 metres off the east coast; Andara, which overlooks Kamala Bay on the west coast; and Istana on Naithon beach, which is near Bangtao beach on the west coast. All have luxury villas for sale.

In addition, he said, Bluepoint condominium is located on a hill and offers stunning views of the developed Patong beach. Bluepoint is causing quite a stir with 12 of 20 units in the small boutique development already sold.

One of the first buyers was a Thai from Bangkok, which is something quite uncommon at the upper-end of the Phuket market. Its uniqueness is not just the views of Patong beach from the approximately two- to three-rai site, but that the design, worked out by Paul Raff Studio in Toronto in conjunction with a local architect firm, is very eco-friendly. It has three eight-metre-high three-floor buildings with grass roofs and and lots of natural shading.

‘‘The walls that wrap around the buildings are all going to be living walls, not just concrete because it will be framed in and covered with vines and plants,’’ he said. ‘‘So when you are looking at it you only see grass and green vegetation. You see very little concrete and steel.’’

Being close to Patong could be a plus or minus depending on one’s personality. It’s the busiest beach in Phuket and receives up to three million people a year.

‘‘One thing about Patong is that it has critical mass, which means there are hundreds of restaurants, hundreds of places to go and eat,’’ Mr Travers said. ‘‘Now they have the Jungceylon Plaza, so they have a modern shopping mall with movie theatres and a bowling alley.’’

Land in and around Patong is more expensive than other areas, costing as much as 30 to 40 million baht a rai. In the east coast it would be around five to seven million baht a rai.

Despite this, there is only a small difference in the price of condominiums. Bluepoint costs 110,000 baht a square metre and those on the east coast about 80,000 to 90,000 baht a square metre.

Mr Travers lamented the lack of a big selection of quality properties for sale in the secondary market because there is demand for them from people who hesitate buying off-plan. Five years ago the island had very few developments, so supply of second-hand villas and condominiums is tight even though many new projects were completed last year.

New luxury resort in Phuket

Outrigger Enterprises Group announced today that it has been selected to manage a new luxury 400-room full service hotel in an exciting new, mixed use resort being built on the island of Phuket in Thailand. The resort, located on Mai Khao Beach along the unspoiled northwest coast of Phuket, will be called the West Sands Resort, Phuket and will feature the new West Sands Outrigger Resort, Phuket hotel, 98 villas and 336 condominiums, along with stand-alone restaurants and a world class water park. City Developments Limited, whose principals include Sir Terry Leahy, a former European Business Leader of the year, and Paul Mercer, well-known developer and president of Central City Developments, is the developer of West Sands, which is the first in a series of lifestyle resorts to be developed by Central & City Developments."This is an exciting opportunity for Outrigger," said David Carey, president and CEO of Outrigger Enterprises Group. "We've had our sights set on Thailand -- Phuket in particular -- for some time now; and we're thrilled to be associated with such a prestigious project and a team of experienced developers known for their high standards and quality projects."

"West Sands offers a superb environment, unmatched anywhere else on Phuket in terms of both property and environment," said Sir Terry Leahy, principal shareholder of Central & City Developments. "We're pleased to have Outrigger as the manager of the hotel at West Sands and look forward to a successful project backed by Outrigger's exemplary reputation and expertise, global strategy, cutting edge technology and proven customer service."

Work is already underway on the West Sands project, with the first 140 villa and condominium units set for completion by the fall of 2008. The West Sands Outrigger Resort hotel facility is part of phase two of the project and is slated to open by end of 2009. Resort amenities will include Phuket's first water park, a beach club, private clubhouse, fitness center, tennis courts, a holistic fusion spa, as well as a selection of retail shops and restaurants.

Condominium units will be located in five-story buildings set amidst their own free-form swimming pools. The one-, two- and three-bedroom apartments will feature large balconies, high ceilings, fully equipped kitchens and luxurious bathrooms. Ground floor units will have their own gardens with private access.

The most luxurious of accommodations will be the Beach, Sea View and Lake View Villas -- large apartment units offering spacious living and dining areas, each with its own Jacuzzi, swimming pool and maid's quarters.

According to Sir Terry, a unique aspect of West Sands is its commitment to being environmentally friendly. "What makes West Sands so remarkable is its emphasis on harmonious living. Luxurious, yes, with exclusive leisure facilities throughout; but the development also has been made as environmentally friendly as possible. Solar energy, superior insulation, biodegradable refuse plants, hydrothermic air-conditioning and hot water systems - all have been carefully planned for the least ecological impact while at the same time maximizing a quality experience."

Although not yet complete, West Sands has already begun garnering recognition for its commitment to being environmentally friendly. On December 1, 2007, West Sands was recognized with the Lighthouse Club Green Development Award at the prestigious 2007 Thailand Property Awards ceremony in Bangkok, Thailand. For additional information on this award, log on to www.thailandpropertyawards.com

Phuket is one of Asia's most popular beach destinations, offering an unbeatable combination of soft, white sand beaches and superb hospitality. It is consistently voted among the world's favorite island destinations in the prestigious Travel + Leisure magazine's annual survey, ranking number eight in 2007. Set in the Andaman Sea off the southwestern coast of Thailand, Phuket is connected to the mainland by a causeway allowing easy road access. The island is serviced by the Phuket International Airport, which is the second busiest passenger airport in Thailand, behind only Bangkok's Suvarnabhumi Airport. Since the early 1980s, tourism has been Phuket's main economic driver. Whether it is world class diving in the Andaman Sea, golf at world-standard championship courses or exciting eco-adventures in tropical forests, Phuket is a favorite visitor destination.

"West Sands is Outrigger's first venture into Thailand, but it certainly won't be our only venture," said Mr. Carey. "We're looking forward to gaining a significant presence within Asia over the next few years. With two projects presently underway in Bali, we are currently looking at other potential projects in Thailand, Vietnam and Hainan Island, China. Outrigger brings a strong reputation and more than 60 years of experience in hospitality management and development to the table, and we look forward to establishing Outrigger's presence in other areas of the Asia-Pacific region.