Pattaya market to grow by 5% this year

Pattaya’s real estate and tourism markets will grow by 5% and 10%, respectively this year, regardless of the political situation, says Jugkarut Ruangratanakorn, vice-president of Ratanakorn Asset Co Ltd, a property firm in the seaside resort city.

The Pattaya real estate market slowed last year and will remain sluggish in 2010 because of political tensions, he said. But he expects the market to recover from 2011 to 2014.

Pattaya real estate hit a trough last year after enjoying annual growth of between 10% and 15% from 2004 to 2008.

Tourism has also struggled because of the global recession and concern about Thailand’s political strife. Tourist arrivals to Pattaya dropped by 22% last year and revenue from tourism sank by 35% because of lower spending per head and shorter stays.

Property and tourism in Pattaya still face many risks, Mr Jugkarut said. Hotel occupancy could fall by more than 40% due to an oversupply in hotel rooms. The property market also remains heavily dependent on foreign demand, while foreigners’ buying power has been hit hard by the baht’s strength.

The condominium market faces an oversupply that will take from three to six years to absorb, while property is overpriced and exceeds demand, he said.

Another risk is a lack of confidence. Buyers fear projects may be suspended. Purchasers may also be unable to complete payments.

“You should maintain a debt-to-equity ratio at 50:50. A loss is better than lack of liquidity, especially in a crisis,” he added. “Developers need to be more careful about units that can be sold and completed but cannot be transferred.”

He said developers should sell when buyers want to buy and always be ready to adjust the plan when needed.

While size and capital are unimportant, familiarity with a location is a bonus.

Land accumulation is another advantage as it accounts for 30-35% of development cost. And networking is essential, he said.

“If property prices rise by 20-25% a year on average for five consecutive years, an exit strategy should be applied. This is a sign to step back. Remember that risk management should be always done.”

Mr Jugkarut said developers should develop their long-term competitiveness by building a strong product character, accumulating capital and prime land plots, expanding to other supporting businesses and establishing expertise in a specific product or market. “For Pattaya real estate, treasure is waiting ahead,” he said at a seminar held by Real Estate Information Centre last week.

“But if you reach out for it today, you may get hurt. [You should] wait for a right time. Investors and developers should know its [Pattaya real estate’s] life cycle. 1997-2000 was its bottom, 2001-04 was a recovery and 2005-08 was a boom.”

If investors are interested in the Pattaya property market, they should know the buyer profiles. Most of the city’s property buyers are foreigners from 15 or 20 countries.

“Foreigners from each country gather into a group, clearly reside in a separate zone and don’t live outside the zone,” he added. “For example, Russians live in Wong Amat, Germans live in Na Klua and British live in Khao Pra Tamnak.”

They also prefer to buy property from companies from their countries or from salespeople who speak their languages.

“You also need to understand the financial conditions and economies of their countries while your products must be customisable.”

SOURCE: Bangkok Post

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