“For the past six months, investment activity in the Bangkok property market was buoyant,” said Umpon Thepnumsommanus, director of investment at the property services company Jones Lang LaSalle Inc.

The firm said it handled transactions worth 3.5 billion baht (US$109.4 million) during the six-month period.

Violent anti-government protests were staged in Bangkok from March 12 to May 19, leaving 90 people dead, 1,885 injured and culminating in a looting and arson rampage that left 36 buildings in flames.

The good news was that the unrest might have persuaded some property owners to sell their assets at reduced prices, Jones Lang LaSalle said.

“As the political unrest that intensified between April and May softened investor sentiment, sellers adopted a more compromising approach with their asking prices, allowing faster sales transactions,” Umpon said.

Bangkok property owners are somewhat notorious for never reducing their selling prices, no matter how severe the economic or political crises battering the kingdom.

Another factor hastening sales during the first half of the year was the approaching expiration of the government’s property stimulus package, such as reduced transfer fees on transactions.

“Many sellers became more flexible during the negotiation process in order to complete the sale and have the property transferred in time prior to the expiry of the property stimulus package on June 30,” Umpon said.

While property sales were strong in politically challenged Bangkok, they were “subdued” in Thailand’s coastal holiday destinations such as Pattaya, Phuket and Samui, the company said.

Jones Lang LaSalle noted that sales at Thailand’s beach resorts have traditionally been dominated by foreign investors, who have been bearish since the global financial crisis hit in late 2008.

Bangkok Property

The company’s chief executive officer Alan Lin said that property prices, especially for city condominiums could rise up to 20 per cent in a couple of years time due to increase in cost of land. However, he said, they are still priced at an affordable level, especially compared to many countries in the region such as Singapore and Indonesia.

“It’s not a surprise now to find a condo unit in downtown area that could cost up to THB 100,000-200,000 (US$ 3,080-6,160) per square metre. The city condo price has increased 5-10 per cent from last year and I’m sure that it could go up more in the years to come”.

Lin also had similar views towards land prices. “Since 2006-2008 land prices in popular locations in Bangkok like Silom, Sathorn, Ploenchit, and Sukhumvit have increased up to 50 per cent

Despite that fact, Lin is confident that demand for properties in prime locations will remain high.

In Q3, Lin said the company will be adding 10 new projects worth about THB 12 billion (US$ 370 million) into its portfolio, all of which are located in the prime area of Bangkok. It also plans to launch the sales of another 10 new projects, worth over THB 6 billion (US$ 185 million), during the remainder of 2010.

Emporio Place

TCC Capital Land is a joint venture company formed in late 2003 between TCC Land, a Thai development company owned by liquor tycoon Charoen Sirivadhanabhakdi, and CapitaLand in Singapore. According to its original plan, the company was planning to launch two condominium projects worth THB 1 billion (US$ 31 million) and THB 1.5 billion (US$ 46 million) respectively.

However the company’s chief executive officer Soammaphat Trisorat said that without funding from their Singaporean partner, the new projects will be developed by TCC Land alone.

“Our partner is quite concerned about the situation in our country and would like to hold its investment for a bit until they are more certain about it. But it won’t stop us from launching some new projects this year. We are here and well aware that the Thai property market has significantly improved in the past month,” said Soammaphat, who’s also executive director of TCC Land.

In the first half of 2010, TCC Capital Land generated sales of approximately THB 1 billion (US$ 31 million). It currently has a sales backlog of THB 9 billion (US$ 278 million), over THB 5 billion (US$ 154 million) of which is expected to be sold by the end of this year, with the rest to be sold next year.

Samma Kittasin, Director of the Property Data Center, said condominium projects remained very attractive among potential buyers in the first quarter of this year as the number of condominium units whose ownership was already transferred totaled 60,000 units, more than double that of the same quarter last year. He said another 60,000 units are due to start up in the rest of this year.

Thailand Condo Market

Actually, many property developers planned to launch their projects in the second quarter, but had to postpone the inauguration due to the recent political turmoil. They are monitoring the economic situation in the third quarter of this year. Should the situation improve and return to normal, they will launch the construction of the 60,000 units in the fourth quarter, he said.

Mr Samma said the information gathered by the center showed the proper projects, particularly condominiums, which gain great popularity among consumers, are located in areas where there are mass transit systems.

Last year, projects, which are of interest among potential purchasers, are located along the Blue Line Bangsue – Tha Phra electricity train route, the Blue Line Hua Lampong – Bangkae route, the Red Line Bangsue – Rangsit route, the Green Line Berling – Rangsit route, and the Green Line Mor Chit – Saphan Mai route.

The number of condominium units sold in 2009 totaled 87,500 and those expected to be sold this year are projected to reach 189,000 units.

Mahanakorn

The Ritz-Carlton modestly dubs the building “Bangkok’s most prestigious address,” which smacks of pretty much every other advertising pitch tossed out by the city’s luxury developers these days.

But few developers are asking prices like this. Units in the Ritz-Carlton Residences range from 27 million baht for a one-bedroom condo to 341 million baht for a penthouse. Not exactly pocket change even for Bangkok’s wealthiest residents.

Ultimately though, it all comes down to whether such an ambitious project — due for completion in 2012 — will sell in today’s depressingly compressed market. But it is, after all, the Ritz-Carlton. And as the wise F Scott Fitzgerald once said, “The rich are different.”

So what then is the outlook for Thailand’s residential property market? Are we too headed for a boom? Booms are generally concentrated on the commercial centres and Bangkok experienced its last boom just prior to the 1997 financial crisis.

The pre-1997 property boom in Bangkok was clearly linked to the corresponding economic boom at that time. In the years leading up to 1997, the country had been experiencing economic growth rates of more than 7% a year, rising to 14% in some cases. Naturally, many people prospered during this period, with riches being made and plenty of “easy money”. Inevitably, this was a recipe for property market speculation, as many people bought new properties with the intention of making good profits on the rising prices.

However, the bust came and many people lost money. Prices in Bangkok today have still not returned to pre-1997 days. It is most unlikely that we will see another boom in the near future.

Apart from the fact that Thailand’s modest economic growth over the past few years has been well below pre-crisis levels, there are a number of other factors which will inhibit future growth in the Thai residential market.

Most of the countries mentioned by the IMF attract high levels of foreign investment in their property markets. Conversely, in Thailand, foreigners account for less than 5% of investments made in the real estate market, with the majority concentrated in resort areas such as Phuket and Pattaya.

Another factor that inhibits sharp rises in property prices in Bangkok is that most people prefer to buy their residences rather than rent. At around 3%, rental yields for property investors here are very low compared with other cities where yields are closer to 8% to 10%. These low yields in Bangkok are clearly a deterrent to potential property investors.

As a general rule, the residential and commercial property markets rise in parallel; commercial rents in Bangkok are therefore also very low compared with other major cities. Rents for commercial properties in Bangkok costs approximately 1,200 to 1,500 baht per square metre, well below those of other commercial centres across the region. By way of comparison, commercial rentals in CBD districts in Singapore and Shanghai are quadruple this level.

Although all this is perhaps discouraging for property speculators, it is good news for companies based in Thailand as rent is obviously a very important cost of doing business.

Meanwhile, generous tax incentives are being offered to companies that establish regional operating headquarters in Thailand and Thailand’s economy is expected to grow by at least 4% this year despite the disruptions of the past few weeks. GDP rose by 12% in the first quarter, the highest quarterly growth rate in Thailand for more than 15 years.

The rapidly growing regional economy will also ensure steady future growth in Thailand. The IMF expects emerging Asia, which excludes Japan, Australia and New Zealand, to expand 8.5% this year and 8.4% in 2011.

The key challenge now for the Thailand property market is for confidence to be restored. Fortunately, past experience has proven that Thailand is very resilient, with foreign visitors and investors very forgiving, coming back quickly despite various problems.

While Thailand is not likely to experience a property boom in the near future, we can be optimistic that investor confidence and economic fundamentals will continue to improve and that future growth will be sustainable, rather than the boom and busts that occurred in the past.

Bangkok Real Estate Market

The Bangkok property market has proved quite resilient in recent years but the on going political unrest will hurt foreign sentiment, while local buyers are likely to take events in their stride, according to real estate experts.

‘A lot of buying in Bangkok is for end users, owner occupiers, and people still need a roof over their head and this situation doesn’t have any impact on that,’ said Robert Collins, managing director of Savills (Thailand).

While foreign property buyers may have been spooked in the short term, Collins expects them to return once the situation normalises.

‘So the long term outlook remains very positive, the fundamentals are very strong. It’s obviously too early to tell the immediate impact other than the sentiment of foreign buyers will be hit, but I think it will be a very short term situation,’ he explained.

He added that the clashes were very localised incidents and while very serious, they were not as bad as the foreign media portrayed them to be.

So far Savills has not experienced any negative concern from its foreign owners of property in Thailand, mainly because the lead up to the political crisis has been so long. ‘If it was fresh, yes, then we would expect property to be quite severely affected,’ he said.

However Savills’ management business, which handles a large number of buildings in central Bangkok, is feeling an immediate impact. ‘That is an area where we have had contact from our clients asking us to increase security and making the building as secure as possible in the eventuality that protesters spread into the areas where they haven’t moved to yet,’ explained Collins.

‘But again it comes back to the fact that apart from the very localised areas where the protests are being held the problem is very contained,’ he added.

However, the violent turn of the drawn out political crisis is likely to have a far greater effect on resort markets. ‘For Pattaya, Koh Samui and Phuket the impact will be felt immediately, not only in terms of less new demand for buying resort properties, but also the hotel occupancy will be down and the businesses that service the tourism sector will continue to suffer. So that is the area where it’s quite a different story,’ he explained.

But it is harder for the real estate market to take strides forward. ‘We should expect the market to continue to remain lacklustre aside from the domestic homeowner housing sector which is performing exceedingly well,’ he added.

Where rentals are concerned, Collins pointed out that there are certainly fewer expatriates with large rental budgets moving into Thailand at the moment, mainly because economic growth elsewhere in the region is better. Vietnam and Cambodia are seeing strong economic expansion, while there has been an extraordinary recovery in both Hong Kong and Singapore since late 2008.

‘A lot of senior expatriates in the region are gravitating toward markets where the business is a lot more robust and that has led to a decline in the number of active parties seeking accommodation in Bangkok,’ he said.

SOURCE: Property Wire

Bangkok Property

After meeting with seven developers yesterday for a discussion on industry trends as well as political impacts, the central bank concluded that there was yet no sign of an asset bubble. The real-estate industry now generates 5 per cent of gross domestic product.

Bank of Thailand Deputy Governor Bandid Nijathaworn said after the meeting that the industry enjoys continued expansion in line with the overall economy.

Last year, supply and demand both expanded by 9 per cent, thanks to the global economic recovery, tax incentives and commercial banks heavy lending activities. Still, as industrial growth is gradual, there is no sign of a bubble.

Despite the political unrest, no developer has revised its investment plan, but it is difficult to estimate the demand side, he said. However, demand is mostly driven by the economy's direction.

Political impacts could dull consumers’ appetite, he said.

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Thanks to Knight Frank for this invaluable information.