Markets in review.

ANNUAL HOUSE PRICE CHANGE (%), IN LOCAL CURRENCY TERMS
	2007* (LATEST)	END-2006
Bulgaria	30.59	--
China (Shanghai)	27.85	-0.61
Singapore	27.59	10.15
Estonia (Tallinn)	23.38	28.64
Lithuania	13.64	30.95
Philippines	13.04	9.63
Colombia	12.82	6.77
South Africa	12.52	15.12
Norway	11.56	16.67
Hong Kong	11.25	4.11
Australia	10.63	9.71
Latvia	10.22	68.99
Sweden	9.86	10.50
UK	9.68	10.49
South Korea	9.01	11.60
Poland	8.38	9.67
France (Paris)	8.27	9.70
Japan (6 cities)	7.75	4.12
New Zealand	6.67	11.86
Canada	6.13	10.74
Finland	5.88	6.56
Italy	5.60	6.30
Spain	5.31	9.14
Indonesia	5.24	6.60
Greece	4.18	10.54
Denmark	3.95	14.94
Netherlands	3.77	4.73
Malaysia	3.20	4.80
Switzerland	2.56	3.24
Germany	2.04	3.06
Portugal	0.49	0.65
Israel	-0.51	-3.16
Thailand	-0.78	1.87
Japan	-1.48	-2.78
Ireland (monthly)	-4.68	11.8
US (NAR)	-5.07	-0.18
US (FHFB)	-3.49	-1.9
US (OFHEO)	1.79	6.03
* latest available Source: various series, list of house prices, data and sources here

In 2007, the US housing market crashed, and Europe’s housing markets slowed. But house prices in Asia-Pacific gained momentum.

Shanghai’s red hot housing market continued to rebound, despite efforts by the government to cool the market. House prices rose by 27.85% to end-Oct 2007 from a year earlier; a significant turnaround from 0.6% drop in 2006.

Singapore registered an annual house price increase of 27.6% (24% in real terms) to end-Q3 2007, significantly higher than the 7.6% price increase over the same period in 2006. In real terms, Singapore was the world’s best-performing housing market, given inflation of only 2.66%.

House prices rose by more than 10% year on year (y-o-y) in nominal terms in several developing countries - the Philippines, Colombia, South Africa, and Hong Kong. However, when adjusted for inflation, price increases were generally substantially lower

Urban land prices in Japan’s six largest cities rose by 7.75% during the first half of 2007. Although Japan’s national urban land price index fell by 1.48% during 1H 2007, this is an improvement from the 2.8% price fall in 2006. The Japanese urban land price index is generally believed to lag reality, so significant recovery is taking place in the Japanese housing market.

ANNUAL HOUSE PRICE CHANGE 2007* (%), ADJUSTED FOR INFLATION
	INFLATION-ADJUSTED	NOMINAL
Singapore	24.29	27.59
China (Shanghai)	20.04	27.85
Bulgaria	15.42	30.59
Estonia (Tallinn)	15.08	23.38
Norway	11.93	11.56
Lithuania	11.43	13.64
Philippines	9.88	13.04
Hong Kong	9.44	11.25
Australia	8.60	10.63
Sweden	7.86	9.86
Japan (6 cities)	7.86	7.75
UK	7.49	9.68
France (Paris)	7.01	8.27
South Korea	6.53	9.01
Colombia	6.40	12.82
Poland	5.81	8.38
New Zealand	4.59	6.67
South Africa	3.77	12.52
Canada	3.66	6.13
Finland	3.29	5.88
Spain	2.88	5.31
Netherlands	2.44	3.77
Denmark	2.29	3.95
Italy	2.08	5.6
Switzerland	1.91	2.56
Malaysia	1.73	3.2
Greece	1.54	4.18
Germany	-0.40	2.04
Latvia	-1.02	10.22
Indonesia	-1.18	5.24
Japan	-1.38	-1.48
Portugal	-1.68	0.49
Israel	-1.86	-0.51
Thailand	-2.81	-0.78
Ireland	-9.08	-4.68
US (NAR)	-8.46	-5.07
US (FHFB)	-6.79	-3.49
US (OFHEO)	-0.56	1.79
* latest available Source: various series, list of house prices, data and sources here

The US housing market continues to weaken.

Asia

Housing markets in several Asian countries gained momentum during the first three quarters of 2007, reflecting to some extent continued recovery from the 1997 Asian Crisis.

The strong house price increases in Singapore, South Korea, and Japan have been mainly due to strong economic growth. Mortgage markets in Asia are generally underdeveloped. Hence the effect of interest rate movements on the housing market is indirect, channeled through over-all economic performance. With electronic goods as the main export of these countries, economic growth is expected to drop if the global economic recession occurs in 2008.

In the Philippines, demand for houses and condominiums has come mainly from families of Overseas Filipinos.

Price increases in China are subject to strong government intervention. Left unhampered, property prices would be expected to rise due to continued economic expansion and rapid urbanization. Adding fuel to the price boom are the Beijing Olympics in 2008 and World Expo in 2010 in Shanghai.

In Thailand, political problems have led to weak economic growth and falling property prices. Property price changes in Indonesia and Malaysia remain unimpressive. Although the national house price index in Indonesia was up 5.2% in nominal terms to end Q-3 2007, the index actually dipped by 1.2% in when adjusted to inflation. In Malaysia, the house price index rose 3.2% (1.7% in real terms) to Q2-2007 from a year earlier.

THE GLOBAL PROPERTY GUIDE’S FORECASTS FOR 2008:

Asia-Pacific

Property prices in much of Asia are still undervalued compared to pre-Asian crisis levels, despite strong increases in 2007.

China is unfortunately not open to investment, and non-resident foreign buyers of dwellings are no longer welcome (though developers still are). While Beijing’s property prices will probably peak in 2008 after the Olympics, Shanghai is still preparing for the World Expo in 2010. With yields at 8% Shanghai’s prices have nowhere to go but up, unless the government intensifies its intervention.

Cambodia could be a proxy for China. Strongly tied to the Chinese economy, Cambodia is open, has high yields, relatively low transaction costs and low taxes, though investors must be prepared for only an indirect acquisition of land due to constitutional limitations on foreign purchases.

The resolution of Thailand’s political crisis in 2008 could open opportunities, after two dismal years. Gross rental yields are good at 7%-8%, income taxes are relatively high but acceptable (compared to the Philippines), the market is pro-landlord. Under better management Thailand could do very well. Indonesia is attractive, but has problems as an investment destination - there are high yields in Jakarta, but very high transaction costs and high rental income taxes. The Philippines too has high yields, but similarly discouragingly high transaction costs and high rental income taxes.

Japan’s housing market is recovering strongly. While Tokyo’s gross rental yields are unattractive at around 4.7%, the price momentum is positive, the law is strongly pro-landlord, there are low-ish transaction costs, and low rental income tax. The recently announced tighter regulation of new dwellings could lead to faster property price appreciation.

In Singapore we believe gross rental yields are now too low, at 2% to 3%. Nevertheless, Singapore is attracting (and admitting) more foreign-born workers – which is positive for prices. Hong Kong’s yields are somewhat higher (around 3% to 5%), and the US$ peg will mean Hong Kong will follow lower US$ interest rates, which should boost the housing market. << Read More... >>

Pattaya turning heads of investors

Backed by a thriving economy and a populace brimming with retirees, tourists, expatriates and prosperous businessmen, Pattaya is fast turning the heads of savvy investors looking for handsome returns in a beach destination.

Pattaya continues to attract astute property investors, who believe today’s market conditions offer the opportunity to lock into excellent future returns, either from rental income or through capital growth.

The year 2004 signalled the rebirth of Pattaya’s real estate sector. Prior to this, few high-quality apartments had been completed.

Continued growth in new housing construction permits since 2004, which grew to the 3.9 million square metres approved in 2006, indicates a healthy property market. Of note is the percentage of permits issued for highrise residential construction, which tripled from 7% in 2004 to 21% in 2006. A high-rise building is recognised as being more than eight stories high.

The successful launch of Raimon Land’s Northshore project in 2004 triggered a wave of upmarket beachfront high-rise developments including La Royale (2005), Ocean Portofino (2005), The Sails (2006), Northpoint (2006) and The Spinnaker (2007). A total of 1,000 new high-end beachfront condominium units are expected to be completed over the next three years.

Premium grade A condominium projects have joined beachfront developments in popularity, bringing the number launched between 2004 and 2007 to 31 sites for a total of 5,177 units.

The number of units launched per year has also climbed, with 2,268 new units announced in 2007. Pattaya itself received 33% of the newly launched units, with 11% and 22% in North and Central Pattaya respectively.

The Jomtien area attracted 26% of the new launches, with 2% in Jomtien itself and 24% in Na Jomtien. Interestingly, 41% of new launches were located outside of the Pattaya and Jomtien areas, with growing interest for Si Racha and nearby Rayong.

Condominiums are popular among international investors as they are more affordable and the only type of property in Thailand that a foreigner can own 100% freehold. Security and maintenance issues are handled by common area management, adding to the confidence in a holiday home investment.

Most foreign property buyers are British, American, Australian and Swedish, a line up that has not changed in recent years and remains a strong base for alien ownership.

Russia recently entered the top five buying nations to demonstrate the emergence of Eastern European investors. Increased interest from China and South Korea is due to the easing of restrictions on fund transfers.

The Germans, French and Scandinavians are also important buyers, and reflect the increasing trend for Europeans to purchase second homes outside traditional European resort destinations. Many have either relocated to Pattaya, spend the European winter there or live in regional business centres such as Singapore, Hong Kong and Shanghai.

However, the bottom line for investors in Pattaya’s high-end residential property market is solid returns, whether from rental yields or capital gains.

Short-term investors have already cashed in by turning over luxury condominiums during the period of short supply. An example is the 187-unit Northshore, which launched in 2004 and sold out before opening in 2006. By 2005, resales were bringing in returns of more than 30% with rates jumping to 40-50% the following year.

Appreciation has been strong. The price record of 119,718 baht per square metre in 2006 jumped 10.7% to 132,479 baht per square metre in 2007, and the sale generated a record-setting capital gain of 80%.

Most of the top 10 sales in 2006-07 generated capital gains of around 30-50%, with the latest resale occurring last month, achieving 180,000 baht per square metre.

Though the returns may not be as spectacular, low-risk, long-term investments in high-end properties can be profitable. While it may be best to steer clear of developers guaranteeing annual gross rental yields of 10%, this level can certainly be achieved as also exhibited at Northshore, where 6-8% yields are already being realised and future capital gains are expected to be handsome.

A typical rental contract is for 12 months and not by the day, with monthly rates between 500 and 650 baht per square metre. Two main markets feed the rental sector: Pattaya residents who are often North American retirees and foreign executives — mostly Japanese, South Korean and Malaysian — who work at industrial estates in the area.

Current market conditions and new developments funded by international financial institutions are signalling a wave of opportunities for high-end residential property investors in Pattaya.

For those searching for a second home and a sound investment, Pattaya looks set to offer excellent returns well into the future.

High costs worry developers (Bangkok)

High costs worry developers

Low-priced projects might be delayed

Property developers should be careful of higher construction costs and new property-related laws as they diversify their portfolios, industry executives said.

Issara Boonyoung, managing director of the residential developer Kanda Property Co, said higher construction costs would likely affect low-priced condominium projects. Those with prices of 30,000 baht per square metre might not be built as costs have climbed to as high as 20,000 baht.

‘‘Despite the good sales, some developers of low-priced units might not be able start construction due to higher costs,’’ he said.

Meanwhile, high-end condominium developers would not face this situation as they have higher margins.

Another issue developers might face is escrow accounts, which might be effective within a year after being talked about for two decades. All developers would need more money to invest for developing projects, but homebuyers would have more confidence in buying a unit as their down-payments would not be used for developers’ cash flow. Environmental issues are also a concern.

‘‘Actually, an environmental impact assessment (EIA) is not a new issue but new regulations on green areas have delayed many projects. There should be clear regulations announced to developers,’’ he said.

Prasert Taedullayasatit, chief business officer of the listed developer Preuksa Real Estate Plc, said the EIA board, at its latest meeting in January, discussed whether to cancel the new regulations on green area. This would be good news for condominium developers whose projects are waiting for EIA approval.

‘‘Last year every condominium developer enjoyed selling units, but they might face difficulties caused by increasing prices of steel. They should try to reduce and control costs,’’ he said.

The Real Estate Information Center (REIC) yesterday reported a survey on residential supply in Greater Bangkok. It found that more than 231,164 outstanding units from 1,157 projects were available for sale at the end of the third quarter of 2007.

Of the total projects, 951 were lowrise and 403 were located in Bangkok, followed by 152 in Nonthaburi, 149 in Pathum Thani, 128 in Samut Prakan, 64 in Samut Sakhon and 55 in Nakhon Pathom.

The total number of low-rise units was 153,648. There were 53,655 units in Bangkok, followed by 35,967 in Pathum Thani, 26,492 in Samut Prakan, 20,906 in Nonthaburi, 11,251 in Samut Sakhon and 5,377 in Nakhon Pathom.

In the third quarter of 2007, 9,402 units were sold and 62,911 remained up for sale, 25% of which were pre-built units. At the same time, 206 condominium projects were sold in the quarter.

Meanwhile, 77,516 condominium units were available for sale at the end of the third quarter. About 44% were priced at 1-2.99 million baht a unit.

Of this number, the largest were in Bangkok with 62,880 units, followed by Samut Prakan with 12,754 units, Nonthaburi with 1,638 units and Pathum Thani with 244 units.

KANANA KATHARANGSIPORN (Bangkok Post)

Condo launches fall (Bangkok)

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

Rental Yields (Bangkok)

Rental yields for luxurious condominiums in Bangkok range from 7.2% to 8.9%. The exception is 300-square metre (sq. m) units yielding only around 6.84%.

In Hua Hin, mountain-side villas are cheapest with prices only reaching up to around US$649 per sq. m. While top luxurious properties can cost almost twice that, 150-sq. m beachfront villas are most expensive at US$4,333 per sq. m.

Land prices surge (Bangkok)

Silom remains the priciest at B650,000

Bang Kho Laem, Sathon and Yannawa districts in Bangkok posted the highest increases in the Treasury Department's new land valuations effective from January until 2011.

Property values in Bangkok rose 5.76% overall under the new assessment from the last survey. Silom Road, in the heart of the Bangkok business district, maintains its position as the most expensive property in the country at up to 650,000 baht per square wah.

The least expensive property in Bangkok was in Nong Chok district, at 260 baht per square wah.

Besides Silom Road, the next most expensive properties were located on Yaowarat Road in Chinatown, at 550,000 baht per square wah, followed by Sampheng at 500,000 baht, Siam Square at 350,000 baht, Asok at 260,000 baht, and Ekamai at 170,000 baht.

Klaew Tongsom, the director of the department's Property Valuation Bureau, said the higher valuations for Bang Kho Laem, Sathon and Yannawa reflected municipal plans to position the three districts as the financial centre for Bangkok.

Land values in Bang Kho Laem under the new 2008-11 framework rose 56.86% from the last valuation, while Sathon values increased 52.38% and Yannawa 50.94%.

The official valuations are used to assess property taxes and also serve as a benchmark for property transactions by the private sector.

Mr Klaew said that valuations for another five Bangkok districts - Don Mueang, Bung Kum, Bang Kapi, Huai Khwang and Lat Phrao - would be adjusted further in 2008 for use in 2009 to reflect changes of more than 20% in prices.

Bang Sue district also recorded a 33% increase in land values, mostly due to speculation of the area's increasing importance as a transport hub for the new Red and Purple mass-transit lines.

Puntip Surathin, the director-general of the Treasury Department, said the new valuations included assessments for more than 30 million plots nationwide.

Of the total, 5.12 million plots were assessed on an individual basis, including 1.8 million in Bangkok and the rest in 23 provinces. The other 24.9 million plots were assessed on a block basis.

Upcountry land values rose on average by 26.97% in the new assessment.

The most expensive property values were recorded in Hat Yai in Songkhla province, at 400,000 baht per square wah. Southern property values increased by 85.79% on average from the last assessment, the highest increase of all regions.

The cheapest property values were recorded for Ban Rai, Uthai Thani and Doi Lo in Chiang Mai.

In the eastern and central provinces, prices rose by an average of 11.71%, with Muang district in Samut Prakan the highest at 140,000 baht per square wah. Values in the North rose 15.43% overall, with Muang district in Chiang Mai quoted at 250,000 baht per square wah.

For northeastern provinces, values rose by an average of 22.97%, with Muang district in Khon Kaen quoted at an average of 200,000 baht per square wah.

Surat Thani in the South had property values adjusted to 11,000 baht per square wah from 1,500 baht earlier. Officials said the sharp increase reflected higher land demand for agriculture.

Udon Thani also recorded a sharp increase of 55% in the new valuation, reflecting the province's strategic location along the North-South Corridor running from southern China to the Laem Chabang Port as well as the East-West Corridor ending in Danang, Vietnam.

WICHIT CHANTANUSORNSIRI
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