Source: Bangkok Post

The luxury property market is still strong due to healthy demand and high purchasing power, reflected in the fact that fewer than 20% of purchasers seek loans, according to Chatchai Payuhanaveechai, a senior vice-president at Kasikornbank.

Most buyers of luxury units pay cash as they are seeking better returns than from bank deposits in the face of inflation that is hovering around 6%, he said.

Yields on bonds and debentures are also seen as unattractive and stocks are too volatile, while prime real estate can bring rental returns of 5-8% per year.

‘’You need to know the real estate market and each asset’s liquidity. Choosing a good location is the key,'’ Mr Chatchai said.

Developers of luxury units are offering more than 7,000 units at 24 projects in an exhibition taking place until May 18 at Siam Paragon, while three property brokerage firms are looking for combined sales of 2.75 billion baht.

Aliwassa Pathnadabutr, managing director of the property consultancy CB Richard Ellis (Thailand), said demand in the segment remained healthy.

Unit prices have been increasing at between 7% and 15% a year depending on the project and location, while units at the very top end of the market can fetch nearly 300,000 baht per square metre, she said.

Sixty percent of luxury property buyers are Thais and 40% are foreigners, up from 15-20% in the past, according to CBRE.

‘’Confidence is a major factor affecting decision-making and demand in this segment,'’ Ms Aliwassa said.

CBRE is selling six projects worth a combined 15 billion baht and hopes the exhibition would generate sales of two billion baht. At a similar event last year, the company generated 800 million baht from five projects.

Harrison, another participating real estate brokerage, expects sales of 600 million baht from eight projects where it has four billion baht worth of units on offer.

Phanom Kanjanathiemthao, managing director of the property agency Knight Frank Chartered (Thailand), said his company was selling three projects worth 10 billion baht and expected to sell 40 to 50 units worth 150 million baht, up from 50 million baht from a single project in the 2007 showcase.

One of the three projects is the 400-unit My Resort condominium worth two billion baht at the Phetchaburi-Asok Junction, being developed by Everland. After a month of pre-sales, 20 units worth 100 million baht have been sold.

‘’Demand in the high-end segment is strong but prices are up 20-30% due to higher costs of construction and land. Developers needed to increase their marketing budget as sales slowed down last year,'’ Mr Phanom said.

According to the company’s research, average prices of Bangkok condominiums have risen from 65,000 baht per sq m to 82,000 baht in the past year. New condominiums in Hua Hin are fetching 120,000 baht per sq m, up from 85,000 baht, as construction costs are 10-15% higher and land prices in the resort town have risen 20-30%.

Somchao Tantaterdtham, president of the Thai Real Estate Association, said transfers of residential units during the first two months of 2008 increased from the same period last year due to higher confidence among consumers.

Significantly, transactions were up even though new tax incentives approved by the government did not take effect until late March.

Transfers of single houses and townhouses totalled 1,200 units in January and 1,167 in February, up from 903 and 1,150 units respectively in the same two months last year.

Condominium unit transfers totalled 973 units in January and 888 in February, up from 616 and 759 respectively in January and February 2007.

‘’Risks remain. Higher oil prices affected overall construction costs while steel prices never go down. Under such circumstances, the government should support building the investment atmosphere,'’ Mr Somchao said.

Cash-rich buyers keep luxury real estate market healthy

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Source: The Nation

Construction companies have expressed an intention to increase their prices between 8 per cent and 10 per cent by the second quarter of this year consequent to the rise in prices of raw materials. Prices have risen between 10 per cent and 20 per cent since last year.

According to a survey conducted by The Nation, construction companies have had to carry the rising cost of construction.

For example, the price of steel rods has risen from Bt28 per kilogram to Bt35 per kg, excluding the transportation cost. When combined with the transportation cost, steel rods cost Bt40 per kg. Cement prices have risen from Bt3,000 per ton to Bt3,250 per ton, while, the price of ready-mix concrete has risen from Bt1,600 per cubic metre to Bt1,700 per cubic metre.

Transportation cost has also shot up following the oil-price rise and now constitutes about 10 per cent of the construction cost.

However, construction companies cannot charge more because most construction contracts were signed in 2006. As a result, construction companies have been incurring losses.

Thailand’s largest construction company Italian-Thai Development’s managing director Premchai Karnasuta said the company has had to shoulder the higher construction cost of about 10 per cent for existing projects valued at Bt66 billion. As a result, the company will generate profits of only 7 per cent - below the expected 10 per cent - last year.

However, the company believes it will generate enough profits to achieve the target of about 10 per cent this year after it adjusts the construction price when it signs new contracts, for which bidding will start in the second quarter.

Meanwhile, the company has also made efforts to improve its construction process to reduce costs. This too will help the profit outlook and it expects to do better this year, he said.

“Project owners must know that they will face higher construction cost when new contracts are signed. Our new prices will be reasonable and will create a win-win situation for both parties,” Premchai said.

Bouyges Thai’s deputy managing director Suphot Sonsuwan said, the company had earlier tried to negotiate with project owners to adjust the construction price when raw-material prices rose. However, some project owners did not accept the new prices. Thus, the company had to complete construction under the existing contracts. However, the company will adjust its construction price for new contracts, especially for new high-rise buildings which is expected to rise between 8 per cent and 10 per cent.

The company has also put in efforts to improve the speed of its construction process and help project owners reduce their cost even though they have to pay a higher price as per the new contracts.

“We accepted losses last year because we could not modify contracts. Now, we will adjust our prices by up to 10 per cent,” Suphot said.

Construction firms set to charge more

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Source: The Nation/Dr Teerachon Manomaiphibul

Real estate is one of the most regulated industries in Thailand.

Although strict regulation makes a lot of sense for an industry that has a direct impact on people’s lives, excessively strict regulations can hurt its growth and prosperity.

Strict zoning regulations, issued in 2006, have made the development of new projects costlier and more time-consuming. These regulations cover floor area ratio; gross building area per land area ratio; open space ratio; and open space per gross building area ratio.

Meanwhile, the Environmental Investigation Agency has become stricter. This change in stance is affecting many residential projects because the Environment Impact Assessment (EIA) approval process is time-consuming. This can cause a significant reduction in the internal rate of return for the project.

If the developers are to retain the required return, the increased cost will eventually be transferred to the customers.

The Natural Resources and Environment Committee also revised the laws for the Environmental Investigation Agency. The key differences are:

- The new EIA criteria applies to any building covering more than 2,000 square metres.

- The new criteria is applicable to projects covering more than 10,000 sq m.

- Projects with 250 subplots or more, or area over 100 rais are also covered in the EIA.

We recommend setting up a one-stop service to reduce the time in which a permit can be issued, and having one ageancy where the EIA submission can take place. These measures will make the process more convenient and reduce the cost of construction. There is already a proven example of one-stop service within Thailand with the Industrial Estate Authority of Thailand.

Stricter laws could stifle real-estate boom

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Source: The Nation

An influx of money from developers has spurred demand on the island

Land prices in Koh Samui are expected to rise between 20 per cent and 30 per cent a year as a number of property firms expand their investment in sectors such as retail, residential-project developments, hotels and resorts, Thailand Estates Corporation (TEC)’s chief executive Chaiyagarn Sudamphanthorn said.

TEC is a local property developer on the island.

He said land prices in Koh Samui have risen from Bt10 million per rai in 2003 to Bt60 million per rai this year for land designated for retail and commercial use.

Meanwhile, price of land designated for residential projects and located close to the beach is now between Bt15 million and Bt25 million per rai.

Land located on the hills is available for Bt5 million to Bt15 million per rai.

Chaiyagarn said demand for land in Koh Samui registered strong growth after a number of retail companies invested in the island.

These companies include Siam Makro, Tesco Lotus and Big C.

A number of luxury hotel-and-resort companies have also grown their investment in the island.

According to research by international property agency Colliers International Thailand, about 12 luxury hotels are under construction and are expected to start operations between this year and 2011.

The cumulative value of the hotel projects is Bt30 billion.

These projects include Santiburi Residence, Conrad Koh Samui Resort & Spa, W Retreat & Residence, Dusit Resort Samui, Banyan Tree Koh Samui, Intercontinental Resort Samui, Park Hyatt Koh Samui, Vana Belle Luxury Collection Samui, X2 Resort Samui, Ibis Samui, IMM and The Sarann.

Given the strong demand for real estate in Koh Samui, Chaiyagarn estimates that land, especially stretches close to the beach and commercial areas, will touch Bt100 million per rai by 2011.

Sinthoranee Property’s managing director Wuttichai Phaoenchoke, who recently expanded his business in Koh Samui and has developed a residential project under The Sea brand, said the company has invested in the island because it believes that demand for residential projects, especially from foreign investors, has strong potential.

The company also plans to launch a new resort development in Koh Samui this year.

Koh Samui land prices take off

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Source: Bangkok Post/Nigel Cornick

Over the past three years, Thailand’s resort areas have rapidly progressed as desirable destinations for upmarket real estate investors.

The tourism industry has opened the eyes of many buyers and the Kingdom has clearly established itself as a place where people want to reside, in terms of affordability, lifestyle and cost of living.

There are not really any negatives except one, and it relates to foreign ownership.

Regulations currently limit foreign freehold to 49% of the saleable area in a condominium, and because of this, the industry is being held back by as much as four times its growth potential.

Last year, Raimon Land sold four billion baht worth of resort real estate, but it could have sold almost double that if there were no restrictions.

Relaxing the quota to 70% or more would provide a major upside for the industry. If we had the ability to guarantee foreign ownership, the market would expand significantly, as there is no doubt that the demand is there.

It is frustrating, not only for the real estate industry, but for the prosperity of the country as a whole, as the opportunity to attract more overseas investment is huge.

Of the destinations hardest hit by the regulations outlined in the Foreign Business Act, Phuket and Koh Samui stand out. They rely on overseas investors, as Thai buyers show limited interest.

Thai nationals typically prefer to buy in Hua Hin and increasingly in Pattaya, although there are indications that this is slowly changing in Phuket where attractive capital gains and rental yields are being realised.

Overseas investors on the other hand, are driven more by lifestyle imperatives. They are seeking a pleasant retirement location or a second home; investment yields are often a secondary concern.

Thai and foreign buyers may have different motivations for condominium purchasing, which creates an interesting dynamic when it comes to pricing and future resale.

This is clear in the current quota system, which divides condominiums into two separate markets: Thai and foreign. If you are a Thai and buying into a project, your future gains are greatly limited as you are buying part of the Thai quota and can only sell to a Thai.

Essentially, Thais cannot sell to foreigners. So the foreign quota system is actually working against Thais themselves and hindering them from profiting from real estate investments in the future.

Because of the quota, it raises serious questions for developers regarding whether it is worthwhile investing in destinations that are not popular with Thai nationals.

In Pattaya, it is a slightly different story, where we are seeing an increase in Thai buyers, as they see investment potential in terms of both capital gains and rental returns due to the active executive expatriate and retiree rental market in the area.

Hua Hin presents a different case altogether, due partly to its long association with the Royal Family. But the former high percentage of Thai buyers against overseas buyers is changing. The split used to be 70% Thais, 30% foreigners. Now it is 60% Thais and 40% foreigners. Once foreign demand reaches 49%, Thais will no longer be able to sell to them.

The stage is set for Thailand’s property industry to continue to benefit from the international perception created by the tourism industry, but if key issues are not solved, there is a risk the industry will never reach its full potential.

Perhaps we are not doing enough to create awareness in the right circles. But if there is not a change soon, we could lose opportunities to neighbouring countries such as Vietnam and Malaysia, who have adjusted regulations to entice overseas buyers to their countries.

It is unlikely that Vietnam will be taking any property investment business away from Thailand soon, because there’s no stock and little infrastructure. It is still not considered a “world” destination.

In other words, everyone knows where Phuket is, but they don’t know about Na Trang. However, they will in the future and destinations like Na Trang will certainly become competitors.

The main point is that these countries are prepared to change their rules and regulations to attract foreigners. They want foreigners to come and buy their real estate.

As such, it is not so much a question of how much Thailand is losing from the quota system, but how much it could be gaining if the Condominium Act increased the quota for foreign buyers.

This is extremely important to a developer’s investment strategy. They don’t want to have 50% of their buildings sitting empty with no or few prospects of finding a buyer.

Thailand’s property sector and all the associated industries could receive a huge boost in investment, which would benefit the entire nation, if it raised the foreign quota in the nation’s condominiums. It is what the industry, and indeed the country, truly deserves.

Higher foreign quota will spur resorts

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Source: The Nation

The Real Estate Information Centre surveyed over a dozen key property markets around Thailand late last year.

Apart from Bangkok and its five neighbouring provinces, the field survey also covered major provinces in other regions, such as Chiang Mai, Phuket, Chon Buri, Rayong, Nakhon Ratchasima, Khon Kaen and Ayutthaya.

About 1,600 housing estates, each with at least six units remaining to be sold, were part of the survey. These low-rise housing estates had a combined planned total of 232,000 units in different phases of completion.

About 64,000 units were yet to be constructed. Approximately 39,000 units are under construction, while 129,000 units had been completed.

Seventy-three per cent of units that were either under construction or completed had already been sold, leaving 45,000 units.

The proportion of new condominium units as the percentage of the total new annual supply of all types of completed housing units in Bangkok and surrounding provinces has jumped from 12 per cent to 22 per cent from last year. The number of condominium units under construction was almost three times the number for low-rise housing units being built.

I can envision the proportion of newly completed condominium units to represent at least a quarter of all types of housing completions in the next few years.

Mass-transit systems linking Bangkok with its outlying areas will encourage developers to build low-rise units in those areas.

That could help reduce congestion in the condominium market, but only to a certain degree, as more high-rises are going to be built along the routes.

Huge supply of condos in Thailand coming in next few years

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Source: Bangkok Post

Company expecting robust 2008 growth - Transport links boost property

The listed developer Sansiri Plc (SIRI) plans to develop 300 units of high-end single houses worth 5.4 billion baht next year with an investment of around 800 million baht for new land plots in the Srinakarin, Ekamai-Rarm Intra and Kallapapruek areas, says Samatcha Promsiri, the company’s assistant vice-president for marketing.

Sansiri has very few high-end units for sale after it recently closed sales of the last 10 units worth 250 million baht at its Narasiri Pattanakarn estate. To cover all housing segments, the company needs more Narasiri units.

Mr Samatcha said the three plots would be bought in the third quarter of the year. They include a 35-rai site in the Srinakarin area, a 40-rai site in the Ekamai-Rarm Intra area and a 25-rai site on Kallapapruek Road. Each would have around 100 units priced between 10 million and 20 million baht a unit.

‘’Srinakarin has high potential for the high-end segment as the location is very close to Suvarnabhumi Airport with new transport routes such as Kanchanaphisek and the airport link,'’ he said.

The location also has potential for single house rentals, proven by 30 rental units among the 177 units at the company’s Narasiri Pattanakarn.

The rental rate is now 180,000 baht a month for homes on lots ranging from 100 to 250 square wah with a usable area of 300 to 500 square metres. The annual yield is 6-7%.

‘’At first, we kept 15 units for rent and planned to hold them as recurring income. But finally we sold all of them as some customers and investors saw the potential to invest in single rental houses in the high-end segment,'’ he said.

According to company research, Bangkok had a total of 4,200 single-housing units starting at 10 million baht a unit at the end of 2007. About 1,500 units were located in eastern Bangkok and 1,600 in western Bangkok.

In the Srinakarin area in eastern Bangkok, the cumulative take-up rate of the high-end single housing segment was 83% due to strong demand.

‘’The high-end single-housing segment was in its actual situation last year. The sales rate did not fluctuate. Sales have been stable since after the economic crisis. If the economy booms, the segment will also boom.'’

He added that the sales rate in the high-end housing segment is not as rapid as the middle-to lower-end segments. The take-up rate is normally four units a month and customers in this segment have high purchasing power.

To be successful in the high-end single-housing segment, Mr Samatcha said, firms must focus on location and price. Next customers care about the developer’s history and relationship with the community.

‘’We will study more and go in deeper detail for each site before launching a high-end project. We will adjust unit sizes to be more efficient and increase functions in each square metre of the unit,'’ he said.

‘’There will be no new Narasiri projects this year as we’re selecting land plots and developing new housing designs.'’

Currently, Sansiri’s high-end single-housing projects include The Emperor and The Gallery. But after learning that the brands confused consumers, the company decided to drop them.

‘’Our firm name and housing brand can be sellable. Housing brands followed by location name are easier to market,'’ he said.

Of the 26 new projects scheduled for launch this year, seven would be single-housing projects worth 7.6 billion baht, which Sansiri would develop. The rest would be high-end condominiums by Sansiri; middle- to lower-priced condominiums and townhouses by its subsidiary Plus Property; and lower-priced single houses by another subsidiary, Prom Pattana.

The seven single-housing projects would be the expansion of a new phase in current projects, including The Emperor in Bang Khae; Setthasiri in the Pracha Chuen and Seri Thai areas; Saransiri in the Rarm Intra, Chaeng Watthana and Pracha Uthit areas; and Burasri Sanam Bin Nam.

SIRI shares closed on the SET on Friday at 3.96 baht, down 10 satang, in total trade worth 31.7 million baht.

Sansiri set to develop more high-end housing projects

Technorati Tags: Sansiri set to develop more high-end housing projects

Source: Bangkok Post

The time is right for foreign investors to invest in Thailand as the economy will see limited effects from high oil prices and the US sub-prime problem, Industry Minister Suwit Khunkitti said yesterday.

Addressing the British Chamber of Commerce Thailand (BCCT), Mr Suwit said Thailand was more resilient in the face of high oil prices as alternative fuels were available including natural gas, biodiesel and gasohol.

Thailand last year cut its import volumes of crude oil and fuel oil by 5.5% and 5%, respectively, while sales of fuel-efficient cars increased by 40% in the first three months of this year, he said.

On the effects of the US credit woes, the minister said Thailand had more diversified export markets to offset the falling exports to the United States, including China, India, Australia and the Middle East.

Despite the US slowdown, Thai exports rose 24.1% in the first three months of this year in dollar terms, with high commodity pushing up the value of agricultural products by 31.4%. Mr Suwit noted.

‘’Thai financial institutions are unlikely to be directly affected [by the sub-prime crisis] because they have limited exposure to those high-risk products,'’ he said.

The development of Suvarnabhumi Airport as a regional air hub, as well as more roads to better connect Thailand with neighbouring countries, were also positive factors, he said.

‘’This is the time to invest in the region, especially in Thailand, to cash in on the prosperity of this region and regional integration. Thailand is the country of choice for investment in Asia.'’

Any revisions of rules and regulations initiated by the current government would result in a more more investor-friendly approach, he added.

‘’The revision, for example of the Foreign Business Act, would make regulations more pro-investment, making investors feel more confident to invest and do business in Thailand,'’
said Mr Suwit, also a deputy prime minister.

As well, he said, the investment promotion criteria of the Board of Investment (BoI) would be adjusted to be more ‘’convenient and transparent'’ and the process of approving applications would be shortened to only 15 days.

To make Thailand a better investment destination, the BCCT yesterday submitted a package of recommendations to Mr Suwit to strengthen the kingdom’s attractiveness against lower-cost neighbours, mainly Vietnam and China.

BCCT director Stephen Frost urged the government to open up the education and training industry, in which UK businesses were keen to come to Thailand.

‘’In Thailand, educational institutions can’t be 100% owned by foreigners, which is allowed in Singapore,'’ Mr Frost said.

Suwit says economy is still very resilient

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Source: The Nation

Building on the success of its previous MFC - the Nichada Thani Property Fund (MNIT), which had 10 dividend payments worth Bt158 million - MFC Asset Management recently launched yet another closed-end fund, this time also partnering with Nichada Thani.

Like MNIT, the Bt1.075-billion Multi-National Residence Fund will invest in properties with a large expatriate presence, said Pichit Akrathit, president of MFC Asset Management. MNIT’s success can be attributed to the generally higher purchasing power of expatriate tenants, mostly executives of multinational companies, said Pichit.

With the economy back on its feet, despite what seems to be another bout of political power struggles, foreign white-collar workers are coming back. It will be the first time that MFC has ventured into the Eastern Seaboard industrial area, serving the housing needs of the large expatriate community, mostly US, Western European and Japanese petrochemical and automotive executives, said Natree Panassutrakorn, MFC’s senior property fund manager.

Thailand continues to be a top-three property hotspot for foreign investors, particularly in office buildings where rents are low, said Natree.

Although there are two or three property funds worth about Bt4 billion, focused on office buildings, distribution centres and serviced apartments, MFC chose to go ahead with residential properties first for lower-cost and maintenance reasons, said Natree.

In addition to two properties - one housing complex and another set of apartments in the Chaeng Wattana area - the fund will also invest in 35 houses in Chon Buri. The three freehold properties have a total average valuation of Bt1.2 billion, and are expected to appreciate at a rate of 3 per cent per year, said Natree.

“Freehold means investors can take advantage of land and property appreciation,” said Natree.

The fund promises a 7.5-per-cent return for the first year, with an annual increase of 0.1 per cent for the subsequent six years. Natree said that Nichada Thani had to make a nine-month deposit in advance as a guarantee of rental fees. MNFC’s 10-year-old Danicha Garden apartment complex, although slightly old, has a consistent 100-per-cent occupancy rate.

There are troughs though since expat properties are seasonal. Summers can be especially tough.

The initial public offering period for MNFC runs until May 8.
MFC fund to venture yet again into expat properties

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Hong Kong tops list of most expensive locations while Bangkok is ranked 15th

Source: The Nation

Singapore

Singapore’s residential rents for a three-bedroom apartment have increased by more than 30 per cent from 2006 to last year and the nation state is now ranked as the fifth most expensive location in Asia, according to a survey conducted by ECA International.

ECA International is the world’s leading knowledge and solutions provider for global human resources professionals.

Undertaken annually, ECA’s Accommodation Survey compares rental prices in 92 locations worldwide. The data is used in ECA’s Accommodation Reports, which ECA-member companies and clients consult while formulating housing policy and allowances for their internationally mobile staff.

Ranked as the ninth most expensive location globally, a three-bedroom apartment in a popular expatriate area in Singapore costs approximately US$4,460 (Bt140,152) per month on average. That is 33 per cent higher than in 2006, when a comparable apartment would have cost approximately $3,364, and the highest year-on-year percentage rise in Asia, followed by Mumbai and Guangzhou.

“The demand for high-end accommodation has risen, driving up rental prices, which can partly be explained by companies expanding their operations in Singapore together with government initiatives to attract skilled workers from overseas,” Lee Quane, general manager, ECA International Hong Kong, said.

Although rents in Singapore are rising, a comparable property in Hong Kong - the survey’s most expensive location - costs more than double. In Tokyo, the second most expensive Asian location, a three-bedroom apartment costs more than 60 per cent to rent than in Singapore.

“While accommodation costs in Singapore have increased considerably over the past 12 months, it remains a competitive location for companies moving staff into the region,” Quane said.

Six of the ten most expensive locations in the world are in Asia, with Hong Kong (first), Tokyo (fourth), Mumbai (sixth), Seoul (seventh), Singapore (ninth) and Ho Chi Minh City (tenth) taking the lead.

Meanwhile, Bangkok ranked 15 in Asia and 50 in the global market.

Moscow, New York, London and Caracas make up the ten most expensive cities to rent a three-bedroom apartment.

Karachi is the cheapest city in the world to rent a three-bedroom apartment, with the average monthly rent nearly eight times less than an equivalent accommodation in Singapore.

Survey shows rental rates in Asia rising

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