Developers return to Koh Samui

Builders to resume work on projects as government dispels uncertainty about FBA

The Koh Samui property market is poised to stage a recovery this year, following the government’s decision to relax the Foreign Business Act (FBA), says property expert Pisarn Tangkasombat.

He said demand for residential projects on Koh Samui doubled in 2006 from the year before but that most developers suspended projects after the previous government tightened the FBA and announced stricter norms on land holding and construction licences for developing residential projects.

Pisarn, also president of the Arayaburi Group, which owns five hotels and resorts on Koh Samui, said most developers – foreign investors and local developers who were partnering foreign investors – had suspended the launch of new projects and work on existing ones. This was because of uncertainty surrounding the Act, as they were not sure whether their projects would be considered illegal.

However, Pisarn said after the new government outlined a clear policy regarding the FBA, developers who had planned projects on Koh Samui would restart work soon.

Some foreign investors will now begin work on their projects in collaboration with local partners, while others have decided to sell their projects to local developers, he said.

“We believe the property market, especially the residential segment, will stage a recovery this year, as the government has announced a clear policy regarding the Foreign Business Act,” Pisarn said.

Research by CB Richard Ellis has shown that Koh Samui, Asia’s emerging “boutique” resort island, is seeing significant growth.

Last year, the island had 1.5 million visitors, up from 600,000 in 2000.

The research also indicates that the number of tourists heading to the island may rise once Thai Airways increases the number of flights on the Bangkok-Samui-Bangkok route to two a day.

The number of airport arrivals this year is expected to surpass 2 million after this.

“ The improved connectivity will be a key factor in supporting growth in the area’s property market. CB Richard Ellis expects increased demand for homes,” said CB Richard Ellis Samui manager Prakaipeth Meechoosarn.

CB Richard Ellis remains confident of the long-term prospects of the Thai resort market.

Last year, the company opened two offices – on Koh Samui and in Pattaya – as part of its plan to expand its network in Thailand. The research said land prices in Koh Samui continued to rise last year even though the number of individual transactions dropped, due mainly to the uncertainty surrounding the FBA.

Last year, the value of property transactions in Samui was estimated at an average of Bt413 million a month, down from an average of Bt450 million in 2006.

Since last December’s general election, reports of viewings and bookings have risen. The type of residential projects most popular on Koh Samui is luxury villas.

Seventy per cent of the villas are priced at below US$1 million (Bt31.65 million).

CB Richard Ellis is now witnessing more developments within a price range of $2 million to $3 million. And as the luxury- villa sector on Koh Samui grows, chances are prices may move to a level that is on a par with Phuket, at least for the top end of the market.
SOMLUCK SRIMALEE THE NATION

ERAWAN has BT9-BN Plan To double revenues

Group embarks on biggest expansion drive in 25 years

The Erawan Group last week revealed a three-year, Bt9billion development plan focused on the hotel business.

It will build 12 hotels in the country in a bid to raise revenue from Bt3.2 billion last year to Bt6 billion in 2010.

This will be Erawan’s biggest expansion since the group was established 25 years ago. It is now diversifying into hotels after running a property business for more than two decades.

The group has already spent Bt4 billion on the first phase, and the remaining Bt5 billion is set for ongoing and future projects.

The group plans to add 2,300 rooms to the existing 1,200 in four hotels: the Grand Hyatt Erawan, JW Marriott, Courtyard by Marriott and Renaissance Samui.

President and CEO Kasama Punyagupta said the group had made solid achievements since he took charge in 2006. At the time, the group decided to sell its leasehold Amarin Tower to the landowner to reduce risks and later entered the hotel sector.

Five hotels with 1,000 rooms will be built this year, the first a five-star property with 61 pool villas located on Koh Naka off Phuket. It will be managed by Six Senses Resorts and Spas.

The other four will be budget hotels located in central Pattaya and on Koh Samui, Phuket’s Patong Beach and Bangkok’s South Sathorn Road. They will be run by Accor’s Ibis Division.

Next year will see six new hotels with about 1,100 rooms. One will be the Holiday Inn Pattaya. The others will carry the Ibis brand: in the Nana area and on Charoennakorn Road in Bangkok, as well as in Chon Buri’s Sri Racha district, Krabi and Phuket.

And 2010 will usher in the final hotel in the plan: an Ibis in Hua Hin.

“We’re using our own money for all of the development,” Kasama said. “ The group has now become a hotel developer, and we’re confident we’re on the right track. We’re allowing professionals to manage all of the properties instead of doing it ourselves.”

The group projects revenue increasing from Bt3.2 billion last year to Bt4 billion this year, Bt5 billion next year and Bt6 billion in 2010.

Hotel and leisure will contribute up to 90 per cent of operating cash flow in 2010, up 30 per cent year per year. The non-hotel business will remain at 10 per cent of cash flow over the next two years.

Kasama said the group had positioned itself as one of the leading profitable companies on the stock exchange, one that offered sustainable growth for shareholders.

To strengthen its competitiveness, the group has reorganised by creating several departments, including hotel investment and hotel development. More professionals have been recruited from outside, especially from the hospitality industry, while some staff were let go.

The group has no worries over the many threats at this time. It said the US sub-prime crisis, currency fluctuations and global economic downturn were not jeopardising its expansion.

“ Thailand remains strong and good for investment,” Kasama said.

The 12 new hotels, ranging from economy to luxury, along with backing from global hotel chain operators will strengthen the group’s competitiveness with all players.

The group sees Thailand itself, particularly its culture, sites and world-renowned hospitality, as key to wooing international tourists to the Kingdom.

SUCHAT SRITAMATHE NATION

Marriott Thailand in major expansion.

Marriott International plans to open 11 hotels and serviced apartments in Bangkok, Phuket and Hua Hin between 2008 and 2010 due to the brighter outlook of the tourism industry, says Panjit Howe, the country’s director of human resources.

She said the tourism industry had been more active since the country’s political situation improved. However, competition in the hotel business on Sukhumvit Road is higher, with the entry of almost every major global brand.

‘‘Last year, all hotels in the central business district faced a drop in occupancy rates. This year they will pick up,’’ she said. The occupancy rate at the JW Marriott Hotel Bangkok declined from 81.9% to 78.5% but is expected to improve to 82.7% by the end of 2008.

In Bangkok, Marriott plans to open the luxury brand Renaissance at two locations: 333 rooms at the Ratchaprasong junction behind Maneeya Center this year and 310 rooms on Sukhumvit in 2010.

As serviced apartments have become a more popular alternative for guests, the hotel will also open three new Marriott Executive Apartments: 195 rooms on Soi Suan Plu off Sathon Road in 2008, 300 rooms on Sukhumvit 24 and 310 rooms near Benjasiri Park in 2010.

In Phuket, it will open two luxury resorts: Phuket Marriott Resort & Spa with 202 rooms this year, and Renaissance Phuket Resort & Spa with 175 rooms in 2010, with a targeted 80% occupancy rate in the first year, said Mrs Panjit.

To tap the economy segment in popular beach destinations, it plans three Courtyard hotels in Phuket: on Patong Beach with 399 rooms, Surin Beach with 256 rooms and Kamala Beach with 180 rooms and another 243-room Courtyard on Cha-am Beach within the year.

The opening rates at Courtyard in Phuket will range from 4,000 to 11,000 baht a night during the low season, 5,500 to 12,000 baht in the shoulder season (the period between the high and low seasons) and 9,500 to 19,500 baht in the high season. The average occupancy rate is targeted at 60% for the first-year operation.

‘‘Given such big expansion, we need to have around new 50 managers and 2,200 hotel staff,’’ said the humanresources director who joined the hotel 10 years ago.

‘‘It’s not only the building, the brand or the marketing plan that leads to a hotel’s success but it’s a spirit to serve which is hard to maintain,’’ said Mrs Panjit, adding that the hotel group’s staff turnover rate was 20% compared to the market’s average of 25%.

Marriott also has a time-sharing business under Marriott Vacation Club International, with at least 250 rooms at the JW Marriott Phuket Resort & Spa. The Phuket Marriott at Kamala Beach and Renaissance Phuket will join this vacation ownership property business in 2008 and 2010, respectively.

Since starting in 2001, it now has a total of 6,000 members and more than half of them are Thais. Membership fees start at US$12,000 or 360,000 baht for eight years. Each member can spend seven nights a year at any of 52 destinations under the chain worldwide.
KANANA KATHARANGSIPORN

Govt opens the door to more foreign investors. (The Nation, 31 Mar 2008, Page 1)

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GOVT OPENS THE DOOR TO MORE FOREIGN INVESTORS
PETCHANET PRATRUANGKRAI THE NATION
The Nation
31 Mar 2008


Four additional restricted businesses will be made more open to foreign ownership this week. “For these four businesses, it will be easier to hold more than 50 per cent in the company,”... read more...

- Rental,
- Operations leasing,
- Financial leasing and
- Factoring



Next to be relaxed under the Foreign Business Act:
- Brokerage,
- Internal trade involving agricultural goods,
- Advertising agency,
- Hotel operating,
- Beverage and food retailing,
- Seed development,
- Computer service,
- warehouse control service,
- pawnshop,
- school
- entertainment businesses.

Serviced Apartment sector BOOMS

Competition will increase with the number of units set to rise to 6,580 by 2011, stoking fears of oversupply

Central Lumpini is considered a prime location for serviced apartments, Grade A as well as Grade B. The price for Grade-A apartments is about Bt1,222 per square metre while Grade-B apartments are available for about Bt1,100 per sqm, according to research by Colliers International (Thailand).

Central Lumpini runs along Rama I, Rajdamri, Wireless, Ploenchit and Langsuan roads and serviced- apartment projects include Cape House, Centre PointWireless and Natural Ville.

These projects comprise 1,984 units.

Another 578 units will be added in the year 2011, the research said. These will be in the Bliss Residence at Soi Ruamrudee, the Baan Rajprasong at Soi Mahadlekluang 3, the Noble Ambience Ruamrudee at Soi Ruamrudee 2, the Siam Kmpinski at Rama I, at St Regis at Rajdamri Road, and two new projects on Ploenchit Road.

Colliers’ managing director Patima Jeerapaet said Central Lumpini was experiencing strong demand because the area is conveniently located for business travellers and tourists.

Meanwhile, Grade- A serviced apartments in the central business district (CBD), which stretches from Silom Road and Sathorn Road as well as other sois in between, ranks second in terms of offer price at Bt1,210 per sqm.

This is followed by the Sukhumvit area, where prices stand at Bt1,093 per sqm.

For Grade- B serviced apartments, prices in the Sukhumvit area are at Bt1,057 per sqm, followed by the CBD where prices stand at Bt738 per sqm.

Patima said demand for GradeA and B serviced apartments arose from the growing number of expatriates.

However, he said, nearly 6,580 new serviced apartments, which will be launched from next year until 2011, would stoke further competition in the market.

“Developers planning to build new serviced apartments this year will have to consider that there might be a oversupply situation by 2011,” he said.

SOMLUCK SRIMALEE THE NATION

Sukhothai in the lap of Luxury

Fifty per cent of the units at the Sukhothai Residences luxury condominium project on Sathorn Road have already been sold. The value of the project is Bt5 billion.

The project has been developed by HKR Asia Pacific, a subsidiary of Hong Kong-based HKR International.

The project was launched last year with a starting price of Bt220,000 per square metre for a standard unit and Bt340,000 per sq m for a penthouse.

“We aim to provide a dream home for the discerning few who value luxurious living and appreciate the Sukhothai culture,” Benjamin Cha, director of HKR Asia Pacific, said.

The Sukhothai Residences comprise 187 units, with sizes ranging between 100 sq m and 1,200 sq m, as well as nine unique penthouse units.

The largest of these penthouses, the “Sky Villa”, will have its own 18metre swimming pool, a patio garden and interior designs which the developer describes as “truly exceptional”.

The company expects unprecedented bids for the “villas” and said the units will set a new benchmark in the Bangkok penthouse market.

Rising 41 floors, the Sukhothai Residences will include some of the most modern and aesthetically pleasing facilities.

These include a 50-m swimming pool and floating pavilion, which will house a juice bar, a gymnasium, a yoga and aerobics studio, steam rooms and a sauna. Other attractions include a concierge service, children’s playroom, landscaped gardens, tennis courts and basement car parking, as well as a full suite of management services.

Construction for the project is set to begin this year and development is expected to be completed by 2011.
PROPERTY REPORTER THE NATION

Bangkok score over cities in the Region

In recent years, condominiums have become the highlight of the Bangkok property scene. The cost of commuting and rapidly changing lifestyles of Thais are the driving forces behind the boom, especially in the downtown condominium market.

Condominiums are attractive to not only the young, but are in high demand among the elderly as they choose them over big houses. The availability of a wide range of options in the condo market in Bangkok, in terms of unit sizes and grades, has also made the segment more attractive.

Even though the prices of condominiums have gone up substantially in recent years, investors in the region still consider Bangkok luxury condominiums good value for money.

To take a comparative view, a super-luxury three-bedroom unit in the new Royce Private Residence Sukhumvit, covering 255 square metres, costs between Bt38 million and Bt40 million, while a similarsized unit in Dynasty Court in the mid-levels of Hong Kong costs about Bt250 million.

Meanwhile, a four-bedroom unit at Ritz Carlton Residences in Singapore, covering 284sqm, costs a whopping Bt360 million.

Bangkok offers better value over Ho Chi Minh City.

A 193- sqm home at the Millennium Residence in Bangkok’s Sukhumvit area, a high- rise with panoramic lake views, costs between Bt23 million and Bt25 million, compared to the about Bt32 million that a three- bedroom unit covering 163sqm in District 1 of the Vietnamese capital costs.

Investors with a budget of between Bt13 million and Bt15 million can buy a brand- new luxury two-bedroom condominium covering about 100sqm at the Athenee Residence on Wireless Road or The Met in Sathorn.

In Hong Kong and Singapore, the same amount of money would fetch just a 32-sqm studio.

In Bangkok, older properties are still cheaper and the coverage area larger.

For example, a 260-sqm, threebedroom unit at President Park costs Bt15 million, while a 366-sqm, fourbedroom unit at the Habitat Sukhumvit costs just Bt21 million.

Prices in Bangkok are about the same as in Beijing and Shanghai. Only Jakarta, Manila and Guangzhou offer lower prices.

Many investors may ask whether property prices in Bangkok will match those in Singapore or Hong Kong.

Prices in Bangkok, in most cases, have been driven by an increase in land prices and construction costs.

Bangkok is one of the few cities in Asia where the construction cost per square metre of saleable area is higher than the land cost element.

In the past, the land cost constituted less than 15 per cent of the total development cost.

However, with significant increases in land prices, especially in the city centre, the land cost has now gone up to about 22 per cent to 25 per cent of the overall cost.

In Singapore or Hong Kong, the land-cost element can exceed 60 per cent.

We have seen similar trends in prime residential areas of Bangkok, where there is a large price differential compared to the sutuation in non-prime locations.

Prices of condominiums in prime downtown locations of the city are likely to increase further, but will never catch up with those in Hong Kong and Singapore where there is a severe limitation on prime land for development.

This controls the supply and makes the market more stable for investors ensuring lower volatility in prices.

Also, the regulations over foreign exchange and ownership in these cities are more flexible and more investor-friendly than in Thailand.

Other related issues, such as taxation on investment and capital gains, are also clearly defined.

However, Bangkok remains a location that offers a wider range of high- quality properties in prime locations, at affordable prices for international investors.

Bangkok’s lifestyle is also more attractive, given the city’s superior healthcare, communications, shopping and transportation facilities.

With the existing selection of attractive projects, an investment in a Bangkok condominium is likely to generate good returns over the short and long term.

ALIWASSA PATHNADABUTR (Bangkok Post)

The Circle (Bangkok)

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