“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.

Developers planning to launch new condominiums with units priced from 50,000 to 79,999 baht a square metre should put off or delay the launches to next year, he said.

“Uncertainty remains in the market,” said Mr Samma. “The global economy is unsteady and interest rates are on an upward trend.

A recent REIC survey found developers are planning to launch 60,000 condo minium units in the second half.

The REIC yesterday released its half-year condominium price index, which surveyed 100 condominium projects in Bangkok in March and April and compared prices with those in last year’s second half.

The condominium price index for all segments in the first half of this year was 101.43, up 1.43% from last year’s second half. The largest increase was in units priced between 50,000 and 79,999 baht a sq m, which rose by 3.42% to 103.42.

“The mid-priced segment is real demand. Investment or speculation is very slight,” said Mr Samma. “Buyers in this segment were less affected by the economic slowdown and political prob lems.” Developers of middle-market projects were able to control the market, so prices were rising higher than in other segments.

Meanwhile, the price index of units priced below 50,000 baht a sq m was 101.47, rising by 1.47%, as buyers are highly price-sensitive. In the high-end segment, with units priced from 80,000 baht per sq m, the index declined by 0.29% to 99.71 as most buyers were foreigners who were scared off by local politics and had their spending power clipped by the global economic crash.

“The index’s average growth of 1.43% showed a healthy, good market. A bubble will be signalled by double-digit growth in the index consecutively for three or four years like what happened in the US from 2001 to 2005,” he said.

The housing-developer sentiment index in the second quarter was at 49.9 points, the first decrease since last year’s first quarter and down from 59 in the first quarter of this year. Listed companies’ sentiment posted the largest decrease, from 67.6 to 53.7, while the index of non-listed firms dropped to 46.2, from 50.5.

The developers’ expectation index for the next six months was 68.9 points, up from 63.4, with listed firms at 77.5, up from 70.5, and non-listed firms at 60.3, up from 56.3.

“Most developers predict improvements in all factors except cost of development, which will be on an upward trend by year-end,” Mr Samma said.

Thailand property market transparency

9 out of 15 fastest improvers are in Europe and 6 are in Asia Pacific. Turkey is the best improver. Australia is the most transparent real estate market. A third of countries are static or declining. 89% of countries received a score of “semi-transparent” or below in relation to the transparency of their real estate debt market data.
Over the past two years, the average improvement in real estate transparency across the 81 markets covered by GRETI has halved, when compared to both the 2006-2008 and 2004-2006 periods.

Of the key components of real estate transparency, the transaction process appears to have been compromised most by the more challenging real estate market conditions of the past two years. More surprising is the evidence of a slowdown of progress in the transparency of real estate regulatory and legal environments. Nonetheless, the quality and depth of information on market fundamentals continues to improve, helping to boost this dimension of transparency in most markets across the globe.

In contrast to previous Indices, a number of markets have seen declining or static levels of transparency with one-third (27 markets out of 81) recording either deterioration or no improvement between 2008 and 2010. Deterioration has been registered in markets such as Pakistan, Kuwait, Venezuela, Dubai and Bahrain. Although the levels of decline have been modest, the reversal of their past gains is notable.

However, there are a number of bright spots, and transparency continues to improve, albeit moderately, in the majority of markets. Of the top 15 improvers, nine are in Europe and six are in Asia Pacific. Turkey tops the league table of transparency improvers, and progress has been made in China, India, Poland, Portugal, Romania, Greece and Hungary. A number of more advanced markets, such as Germany, Ireland and Denmark, have also moved up the transparency league.

As in previous years, Thailand continued to score in the ‘semi-transparent’, however, the country has gradually improved its level of real estate transparency with its real estate market ranking 39th out of 81 markets covered in the 2010 index, compared to the 45th ranking in 2008.

The change in Thailand’s ranking is a result of the relative improvement in the country’s overall transparency score. The scores in the Global Real Estate Transparency Index range between one and five, with one being the highest level of transparency and five being opaque. Thailand’s real estate transparency score has improved to 3.02 in 2010 from 3.16 and 3.40 in 2008 and 2006, respectively.

The improved score is primarily a reflection of more transparency in the capital markets, specifically as they relate to real estate. Currently there are 60 firms listed under the Property Development sector on the Stock Exchange of Thailand. There are also 26 property funds which trade on the Stock Exchange of Thailand, holding assets of various real estate types. These listed vehicles are subject to higher governance and regulation, as well as regular and standardized reporting, thus providing more transparency to Thailand’s real estate markets.

This is in contrast with the past when Thailand suffered badly from a lack of information about real estate transactions in the market. Major sale transactions in particular tended to be kept confidential by the sellers and/or the purchasers. As a result, actual transacted values against which to benchmark were scarce.

Real estate transparency levels vary widely across the region. It has two of the world’s most transparent markets, Australia and New Zealand, which rank first and fourth respectively in GRETI 2010. Singapore and Hong Kong, two other mature economies, also rank relatively highly, on a par with most European countries. However, at the other end of the spectrum, Asia Pacific also contains some of the world’s least transparent markets, such as China’s tertiary cities (ranked 65th) and Vietnam (ranked 76th).

The most notable improvers in terms of global rankings are China and India, which have seen the largest jumps up the transparency ladder amongst Asia Pacific countries. Comparing across time, most countries have registered improvements in overall transparency scores, though with the exception of China and India, these changes have generally been relatively modest. Three markets in the region have moved up into a higher transparency tier: the Chinese secondary cities, Indian tertiary cities and Indonesia, all of which have shifted from the Low-Transparency (Tier 4) to Semi-Transparent (Tier 3) level.

The last two years certainly demonstrate how high levels of transparency do not eliminate risks for investors or occupiers. Free flows of information and consistent enforcement of local property laws did not prevent values from falling or produce better access to credit at a time when liquidity dried up. The real value of transparency, though, should become evident when comparing how quickly markets are able to open up again after a financial crisis. The recapitalisation of real estate in many countries is being helped by the free flow of information and the protection of property rights. However, these rights apply to both the equity and the debt sides in the capital structure of real estate, and sorting them out in a complex, securitised capital structure will take time. Occupiers benefit when landlord defaults are resolved quickly and efficiently. Investors benefit when bankruptcy laws are administered fairly and efficiently. This process is unfolding now. In two years time, when our next Index is released, we will be able to report about the role of transparency in the aftermath of a financial crisis.

2010
Rank Market 2010
Score 2010
Tier
1 Australia 1.22 1
2 Canada 1.23 1
3 United Kingdom 1.24 1
4 New Zealand 1.25 1
4 Sweden 1.25 1
6 United States 1.25 1
7 Ireland 1.27 1
8 France 1.28 1
9 Netherlands 1.38 1
10 Germany 1.38 1
11 Belgium 1.46 1
12 Denmark 1.50 1
13 Finland 1.53 2
14 Spain 1.58 2
15 Austria 1.71 2
16 Singapore 1.73 2
17 Norway 1.75 2
18 Hong Kong 1.76 2
19 Portugal 1.82 2
20 Switzerland 1.87 2
21 Italy 1.89 2
22 Poland 1.99 2
23 South Africa 2.09 2
24 Czech Republic 2.15 2
25 Malaysia 2.30 2
26 Japan 2.30 2
27 Hungary 2.33 2
28 Israel 2.38 2
29 Greece 2.60 3
30 Slovakia 2.61 3
31 Russia Tier 1 Cities 2.64 3
32 Romania 2.68 3
33 Taiwan 2.71 3
34 Chile 2.72 3
35 Russia Tier 2 Cities 2.86 3
36 Turkey 2.90 3
37 UAE – Dubai 2.93 3
38 Brazil 2.95 3
39 Thailand 3.02 3
40 Bulgaria 3.03 3
41 India Tier 1 Cities 3.11 3
42 South Korea 3.11 3
43 Russia Tier 3 Cities 3.12 3
44 Macau 3.13 3
45 China Tier 1 Cities 3.14 3
46 Mexico 3.14 3
46 Ukraine 3.14 3
48 Philippines 3.15 3
49 India Tier 2 Cities 3.17 3
50 Bahrain 3.28 3
51 Argentina 3.30 3
52 Costa Rica 3.32 3
53 Slovenia* 3.33 3
54 China Tier 2 Cities 3.38 3
55 India Tier 3 Cities 3.39 3
56 UAE – Abu Dhabi 3.45 3
57 Indonesia 3.46 3
58 Jordan* 3.46 3
59 Oman 3.50 4
60 Morocco 3.58 4
61 Croatia 3.59 4
62 Egypt 3.62 4
63 Saudi Arabia 3.66 4
64 Qatar 3.70 4
65 China Tier 3 Cities 3.73 4
66 Lebanon* 3.78 4
67 Panama 3.85 4
68 Kuwait 3.90 4
69 Uruguay 3.92 4
70 Kazakhstan 3.93 4
71 Colombia 3.96 4
72 Peru 4.00 4
73 Pakistan 4.18 4
74 Venezuela 4.18 4
75 Tunisia* 4.24 4
76 Vietnam 4.25 4
77 Dominican Republic 4.28 4
78 Belarus 4.48 4
79 Syria 4.65 5
80 Sudan 4.68 5
81 Algeria 4.74 5

Ideo Morph

The company currently has a total of 12 active condo projects under the Ideo brand. With a total of 5,500 units and a combined value of THB20 billion, eight projects will completed and ready to move in this year.

Chief Executive Officer Chanond Ruangkritya said the company will continue to develop another five new condominium projects by the end of this year, with locations based around the city’s mass transit lines.

He said: “Hopefully we will not have any additional political turmoil. Timing is very sensitive. Political issues are something really challenging for us, as well as for other developers, who must time when to launch a project”.

Recently, the company added another high rise property to its portfolio – Ideo Morph on Sukhumvit 38. The project has 199 units, located on a three rai land plot. Prices are starting from THB6.9 million.

Chanond said he is positive about prospects for Bangkok’s property market towards the end of the year, but buyers’ confidence and affordability would impact its growth.

“Another game for us, and for all property markets, is affordability during tough economic times. Interest rates are probably one of the most critical factors. Local banks should keep liquidity flush and be willing to lend to consumers. However, consumer confidence is something we also need to monitor. If consumers feel they still have significant income in the future, I think they’ll continue to buy despite of all uncertainties and political issues,” he added.

Rajaprasong ongoing problem

REIC Director-General Samma Kitsin revealed that the condominiums situated within the one-kilometer radius of the commercial district of Ratchaprasong had been severely affected by the recent UDD rally since April. Many companies have to relocate their sale offices while others have to offer special discounts and promotion packages to customers in order to sell out the remaining units.

The sale figures in April in the downtown Bangkok district plunged more than 50%. Some projects had absolute zero sales during the period because no one could enter the area.

On the big picture, condos in Ratchaprasong are likely to face difficulty in development due to the political factor that hinders customers’ decision and the rising building cost. The price of the property in the area averages at 145,000 THB per square meter and can go up to 165,000 THB while the average sales stand at 7-9 units per month

Obviously, one of the biggest factors in the outlook for Asian markets is the current credit crunch in the US. This is one of the biggest factors globally. Economies have been changed worldwide, and ultimately property values have been damaged. Some regions have obviously done worse than others, or experienced the net effect sooner. Asian property seemed to be relatively unaffected last year, with rental and capital growth exceeding expectations in many cities. The amount of investment increased, and some markets are expected to continue strong throughout this year as well as last. However, some of these economies that bucked the global trend of slowdowns in last year are now expected to see a bubble bursting. Thailand is different.

Bangkok’s 2007 performance went contrary to Asian markets in neighboring countries – growth was quite subdued, and demand grew only slightly. This is widely recognized to be due to political instability, and the cost of living rising in the area due to the price of oil and the weakened US economy. However, these factors are not as negative as they seem! If we look to the current volatility in the Chinese market, we will see why Thailand’s lack of breakneck growth compared to other Asian countries actually makes a condo in Thailand one of the better investment choices in Asia today. Rapid growth has forced the Chinese government to introduce drastic measures to slow down the economy – and these are having a huge effect on property prices and prospects for the country. The market is see-sawing crazily, and in the short term is quite unpredictable. By contrast, the property sector in Thailand has seen slower growth and seems to be in a better position to weather the current storm.

This year should see rents in Thailand rise, especially in the residential and retail sectors. Expansion in the retail sector is not expected to slow down, despite the prospect of higher overheads, though. Property revenues are expected to be slightly down, from around Bt1.59 billion in 2007 to Bt1.5 billion in 2008. The financial industry in the region will be impacted by the US crisis, but opportunities will not disappear entirely. Property law and tax reform changes mean that foreign investors now have an easier time if they are looking for property investment in Thailand. Basically, Thailand has become a more stable and secure prospect, albeit one with lower initial returns, than many other Asian markets.

Both internal and external reports confirm that condos in Thailand are still a good investment. The Bangkok Post says that high end condominiums and properties are holding their own in the market, despite political turmoil. This is linked to tourism performance in Thailand, as the country remains one of the most sought after destinations world wide. Singapore and Hong Kong, where much of Asian money is concentrated, favor Thailand as a holiday destination, and this is translating into some stability for the property market in Thailand at the moment.

Don’t shun the Thai market because of slower growth – it is the choice for stable, long-term investors at the moment.

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.

The agency’s president Sopon Pornchokchai said the supply in the first quarter rose in line with rising investor confidence and improved economic sentiment, as investors were largely unconcerned about political risk.

In his view, the surge in launches may not relate to the government’s property incentives.

Most developers applied a presales policy, so their launches would not necessarily be completed before incentives end on June 30, after being extended from May 31 in reaction to political unrest, he said.

Large developers have expanded their investment plans, partly supported by the raising of the ceiling price for a BoI home to 1.2 million baht.

This opens up tax incentives for developers from the Board of Investment, under its policy to promote affordable units for low- and middle-income earners.

Based on the first quarter’s figures, AREA forecasts that 89,332 units may be launched this year, 55% more than in 2009.

But the figure may be 10-20% lower than the prediction, he said.

The agency found that 43% of new launches in the quarter – or 9,604 units – were sold in the quarter, more than triple the 2,195 units sold in the same quarter last year.

Condominium units made up 55% of launches in the first quarter. The figure of 12,287 condo units launched was an increase of 142% from 5,073 units in the first quarter of 2009.

New townhouses totalled 6,227 units, up by 101% from 3,092 units. New single houses numbered 2,549 units, a dip of 18.35% from 3,122 units.

AREA found the average unit price for the first quarter was 2.279 million baht, down by 29% from 3.211 million a year earlier.

SOURCE: Bangkokpost

Several projects worth more than Bt10 billion each are under construction or on drawing boards in popular locations including Asoke, Phetchaburi, Rajprarop and Makkasan, at the city end of the link.

Property developers began launching residential projects around the Airport Link when its construction began two years ago. Among the early projects were The Complete Rajprarop by Prinsiri, which is worth Bt1 billion and offers 547 units; Ideo Verb Rajprarop by Ananda Development, which offers 447 units and has a market value of Bt1.5 billion; and Chiwathai Rajprarop, which has 329 units and a value of Bt1.3 billion.

The Fragrant Property Group launched a condominium project, The Circle, last year. With a market value of Bt4 billion, 90 per cent of its 901 units have already been sold.

My Resort by Equity Residential, which launched pre-sales in 2008 and will be completed this year, is offering more than 200 units on Phetchaburi Rd and a 400-unit condominium called True Thonglor, developed by Pool Asset.

Asian Property Development introduced its latest luxury condominium, the Address Asoke-Phetchaburi, last year. With a market value of Bt3.3 billion, it offers 574 units at a starting price of Bt5.23 million per unit.

TCC Capital Land, a joint venture between Singaporean-based CapitaLand and TCC Land, which is owned by beverage tycoon Charoen Sirivadhanabhakdi, launched Villa Asoke, with a market value of Bt3 billion, last year.

Alan Lin, CEO of real estate firm Harrison, said the area around the Airport Rail Link was a new focal point for property developers because of the convenient transportation offered by the rail service.

The company is negotiating management deals with developers who own four land plots near the Airport Link, and plans to launch residential projects worth nearly Bt5 billion next year, he said.

“We believe that this location will continue to be popular through 2010. More than five projects are currently being planned that will offer a total of 4,400 units between now and 2011,” he said.

Condominium units in the area have starting prices between Bt75,000 and Bt150,000 a square metre.

Asian Property Development’s managing director Pichet Vipavasuphakorn said his company had launched The Address Asoke-Phetchaburi because the location would become a new destination for homebuyers when the Airport Link was complete and there was easy transportation in the area.

Land prices in the area also remain lower than those in the Sukhumvit, Sathorn and Silom areas. Homebuyers around the Airport Link will be offered new condominium units at lower prices than those in the inner central business district, although the inner CBD will be within easy reach, he said.

TCC Capital Land chief executive Soammaphat Traisorat said that after introducing Villa Asoke to the market earlier this month, a number of customers had shown enough interest to visit the project. As a result, the company believes that when bookings open this weekend, there will be positive feedback from customers.

“We believe that this area will be the new destination for residential development after the Airport Link starts operations,” he said.

Agency for Real Estate Affairs managing director Wasan Kongchan said demand for residences around mass transit systems continued to grow despite the economic downturn, adding that the behaviour of many homebuyers has changed away from single detached houses to condominiums because of last year’s spike in fuel prices.

“We believe this is a good time to buy a residence around the Airport Rail Link, before land and condominium prices in the area begin to rise,” he said.

Wasan said that when the Airport Rail Link began full operations, nearby land and residential prices would rise 10-20 per cent, depending on supply in the market.

Airport Link plans to begin full operations at the end of this year.

SOURCE: The Nation