Weak demand forces a switch from Thailand

TCC Capital Land is focusing on Vietnam, which it sees as a very promising market, while scaling back launches in Thailand from four to two a year.
The joint venture between Singaporebased CapitaLand and liquor billionaire Charoen Sirivadhanabhakdi’s TCC Land might further reduce launches in Thailand next year depending on the overall situation, says CEO and managing director Chen Lian Pang.

‘‘So our emphasis is market demand. If there is a demand, we will go ahead. If there is no demand, we will pull back,’’ Mr Chen said. ‘‘We are very flexible because ours is not a listed company so there is no pressure to produce certain amount of revenue.’’

Aside from Vietnam, TCC Capital Land is also keen on India because it considers other key regional countries such as China, Australia and Singapore to have matured.

Among Vietnam’s attractions is its population of 85 million, 60% of whom are under 30 years of age.

‘‘There is a lot of potential and a big mismatch between supply and demand. For instance, over the next three years Ho Chi Minh City requires about six million square metres of housing supply but the supply is only about 1.9 million — a big gap.

‘‘Hanoi is the same. Over the next three years they need about three million square metres but the supply is only about 1.3 million. So the fundamentals there are right.’’

This clearly means that TCC Capital Land will be focusing on the local Vietnamese market, not expatriates, who might be keen on buying villas there. Foreigners are permitted 50-year leaseholds and not freehold in Vietnam.

Mr Chen drew attention to cultural differences, noting that only 15% of property buyers in Hanoi obtain mortgages. The rest pay in cash either by borrowing from relatives or pooling their resources together in order to make the purchase. The trend indicates there is a lot of hidden wealth in the country.

Both China and Vietnam appeal to foreigners. Unlike Thailand, where foreign developers cannot own more than 40% in a company in order to buy land, these two countries do not impose such a restriction. China only requires local participation but not stating the level. Even Malaysia allows foreign developers to own up to 49% in a company.

‘‘In this sense, they [Thais] are losing out to neighbouring countries.’’

Also whether Singaporean investment in Thailand increases or not depends on the return they would obtain. Mr Chen pointed out that most of them sought a yield of 8% to 10%, with 6% seen to be on the low side.

In any case, Mr Chen believes that the region is expected to continue to feel the impact of the US sub-prime crisis for some time, perhaps one to two more years. Personally, he feels the worst is not over.

The slowdown has affected demand in Thailand, as witnessed by the company over the last two years. Even so, prices are unlikely to drop.

In this environment, it is possible that financially weak or heavily leveraged companies might run into trouble and TCC Capital Land is actively looking for opportunities both within Thailand and across the region.

Mr Chen believes many people might be better off to hold cash for now, but if they do want to commit to property, they may see more clarity in the market later this year.

‘‘But of course the price of good property doesn’t go down. For instance, for TCC Capital Land I don’t think we will drop the prices even if we are not able to push sales. We will wait. Property is basically about timing. If you wait, the price will recover.’’

After perching at the high end for some time by launching a string of posh projects such as Athe´ne´e Residence and Emporio Place, TCC Capital Land dramatically moved to the middle segment recently with its new brand S&S, which stands for sufficiency and sustainability. Its first mid-range project is S&S Sukhumvit located on soi 101/1. This project covers more than six rai of land and consists of two condominium towers, 18 and 22 stories, with a total of 810 units. These range from 29.5-squaremetre studios to 68-square-metre twobedroom apartments with prices starting at 1.279 million baht.

TCC Capital has carefully planned its entry into the middle market. Aside from the eco-friendly focus, it plans to be within one to two kilometres of a BTS station, something that is very appealing to this group of buyers.

Mr Chen finds investing in Thailand to be very different from in his native Singapore. Thais are more pricesensitive than Singaporeans. Also, tastes differ with people here preferring more traditional and classical styles while Singaporeans tend to closely follow international trends.

While studios, one- and twobedroom units near the BTS stations are currently popular among Thais, the trend in Singapore before the recent slowdown kicked in was for bigger apartments.

Vietnam - Foreigners allowed to buy apartments

HANOI: Vietnam has passed a law allowing certain categories of foreigners to buy apartments beginning in 2009, the first time the communist country has allowed non-citizens to own real estate.

The National Assembly approved the new law on Thursday, with 88% of deputies voting for it, the government said on its official website yesterday..

Foreigners eligible under the law can only buy apartments in developments approved for foreign residency, not houses or land. Ownership will be for a term of 50 years, by which time the foreign owners must sell or transfer the property.

Real estate developers said the law was likely to give a much needed boost to Vietnam’s property markets, which have softened recently after explosive growth in 2007.

‘‘It could have a 20 to 30% impact in terms of rising prices,’’ said William Badger, a manager at Leonidas Management, a subsidiary of the Hong Kongbased real estate company Tung Shing Group.

‘‘Similar laws have been passed in China, Thailand and Malaysia,’’ said Misha Chellam, assistant to the chairman of Hanoi-based developer Vietnam Land. ‘‘Each time in those countries when a law like this was passed, it significantly boosted demand.’’

Those eligible to buy apartments include foreign firms purchasing housing for staff, and four categories of individuals. These include foreigners working at Vietnamese firms, foreigners married to Vietnamese, foreigners with special skills needed by Vietnam’s economy, and foreigners who have been awarded medals or other honours by the government.

It was not immediately clear how much the new law would differ from current law allowing foreigners to obtain 50-year leases on property in Vietnam. Normally in Vietnam, new laws are followed by decrees and circulars clarifying how the law will be implemented, and developers expect that the move from lease to ownership will grant foreigners additional security.

$220 million Halong Bay (Vietnam)

The $220 million Halong Star, the first project for Limitless in South East Asia broke ground at Halong Bay near Hanoi, Vietnam.

The event was marked by a soil turning ceremony at the project's 125 hectare site, attended by dignitaries from the UAE and Vietnam, including Nguyen Quang Khai, Vietnam Ambassador to UAE and political leaders of the country's Quang Ninh province.

Halong Star, announced in September this year, is a joint venture between Limitless, Phuong Hung Joint Stock Company and International Property Investment Partners LLC. The project will include the area's first five-star hotel, conference facilities, high-end residential units and recreational, cultural and education amenities, all with extensive views of Halong Bay - a UNESCO-sanctioned world heritage site.

Speaking in Halong Bay, Saeed Ahmed Saeed, CEO of Limitless, said: "Halong Star is our first international project to break ground. The event marks the beginning of a development that will fulfil Halong Bay's massive demand for high-end tourist and residential facilities, especially those with views. I am honoured that Limitless is to play such a major role in enhancing this beautiful part of the world."

The start of the work on Halong Star comes just two days after Limitless marked the official launch of its regional operations for SE Asia, based out of Singapore.

Saeed Ahmed Saeed said: "Limitless was established with the aim of capitalising on Dubai's real estate experience by developing distinctive projects around the world. SE Asia is a strong market for us: Halong Star is one of many Limitless projects in the pipeline for the region."

Limitless will engage well-known architects to draw on traditional Vietnamese, French Colonial and modern Asian design characteristics for the hotel and residential elements of Halong Star. In addition, grounds will be landscaped, featuring lakes and tropical gardens to preserve and enhance the natural beauty of Halong Bay.

The project is expected to be completed over five years.

Surging Demand (Vietnam)

Vietnam faces surging demand for property but also legal shortcomings

The fast-growing economy of Vietnam has opened tremendous opportunities for real estate investment but there are some challenging factors that overseas investors need to consider before jumping on the bandwagon.


Vietnam's high gross domestic product (GDP) growth rate has been fuelled mainly by its two largest cities -- Ho Chi Minh City and Hanoi -- where GDP growth rates last year were 12.2 percent and 11.5 percent respectively, according to Nguyen Quang, habitat programme manager for the UN-Habitat office in Vietnam.

He said opportunities had arisen due to Vietnam's membership in the Asia Pacific Economic Co-operation (Apec) group, the booming stock market and the entry into the World Trade Organisation. More retailers, distributors and investors have entered the market while more local and foreign companies have set up businesses. As a result, demand for office space has surged.

At the same time, housing demand has risen in line with increased job opportunities, higher incomes and consumer-oriented demand from young workers who make up 60 percent of Vietnam's population.

Mr Quang also pointed to the phenomenon of "repatriates" -- workers who have discovered that they no longer need to be in the big cities to make a good living.

"More repatriates have come back to live in their hometowns as the government has opened more opportunities for them to come back, do business and own a residential unit," he said during a seminar entitled "Asia's Real Estate Cycles: the Vietnam Situation".

As a result, demand is growing while supply in all sectors is very limited. Office and retail vacancies are was low and the upward trend will continue due to growing demand and delays in new supply. Demand for good-quality residential projects is also growing.

Sopon Pornchokchai, president of the Thai Appraisal Foundation, told seminar participants that the Ho Chi Minh City real estate market had a lot of potential to grow as the country's GDP was still relatively low -- about half Thailand's figure -- despite a population of 85 million.

"In Vietnam, the land area is about two-thirds of Thailand's. Land prices in Ho Chi Minh City are very high. Of a unit price in Ho Chi Minh City, the land price is four times the housing price while in Bangkok, the land price is only two times the housing price," said Mr Sopon.

Mr Quang said that amid the property boom, some challenges awaited including legal matters, land title problems, speculation, planning and investment procedures.

He said the legal framework had some limitations such as the legacy of the Communist central-planning system, spontaneous and ad-hoc state intervention, dual ownership of land and housing units, and overlapping responsibilities for land use title supervision and planning.

"Access to land-use rights is complicated, such as long-term use and leases on land," he said.

In Vietnam, people cannot own a land plot but the government can grant them land-use rights. Five types of rights are available: right to transfer, mortgage, inherit, rent and transform land.

Mr Quang said the land-title situation was especially chaotic in urban areas because of unclear administrative responsibilities. People also had limitations in terms of access to formal land and housing.

As well, land information and records are not adequate while land registration and formalisation procedures are complicated. The government's planning system is also rigid and the cost of land transfers is quite high.

Another challenge involves differences in pricing that distort the property market. Land value is determined by administrative measures rather than based on the market while land allocation through bidding is limited.

"We lack a market-based and independent valuation organisation," he said. "The booming real estate market has built a lot of real estate brokers but few of them are professional."

Mr Quang said the planning system was inefficient and ineffective as there was a lack of priority-setting. Little co-ordination exists among mechanisms related to socioeconomic planning, spatial planning, land use and sector planning.

"The government should allow public consultation and participation in plan preparation and implementation," he said.

Constraints exist as well on investment procedures and land allocation. They are unclear and complicated while some regulations overlap.

Project and programme assessment and monitoring also need more appropriate mechanisms.

Other challenges include weakness of business capacity and professionalism, limited capital investment, a lack of market research and strategies, constraints on mortgages and access to financial markets, limited savings mobilisation for the formal real estate market, widespread speculation, inefficient land use and corruption and mismanagement.

Copyright (c) 2007, Bangkok Post, Thailand
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