Bangkok Condos

Depending on one’s viewpoint, a glass is either half full or half empty, and this seems to apply to the current Bangkok and resort condo markets because some experts are upbeat about the outlook while others are downright pessimistic. Among those who see the sun shining is Knight Frank Chartered managing director Phanom Kanjanathiemthao.

Land prices — especially in the city near the railway lines — are not any cheaper than they were early this year or last year -

Backed by detailed research of all the launches that took place in Bangkok this year, Mr Phanom said it is very clear that the Bangkok condo market has performed much better than might be expected, and the same applies to key resorts.

While he acknowledged that several projects have been postponed, in his opinion it is significant that launches took place at all throughout this difficult year, although the total is far below peak levels reached not long ago.

Seven condominium projects were launched in Bangkok in the first quarter of 2009, two of which are considered to be premium grade while the rest are B class. The seven projects brought in a total of 1,635 units, of which 1,241 (76%) have been sold. Unit sizes ranged widely, from 31 to 515 square metres, with the average selling price between 95,000 and 195,000 baht/sq m. Significantly fewer premium and A grade condominiums were launched in this quarter, while buyers also opted for smaller and medium sized units.

The second quarter saw the launch of eight more condominium projects in Bangkok , one of them premium class, six B grade and one C grade. These new projects brought in a total of 1,751 units, of which 1,004 (58%) have been sold. Unit sizes ranged from 27 to 372.64 sq m and the average selling price was from 75,000 to 170,000 baht/sq m. Smaller and medium size units of one to two bedrooms were in greater demand in this quarter.

Two projects were launched in the third, quarter of the year, with both classified as B grade in the research Mr Phanom cited, although they are situated in the Sukhumvit zone of the city. The first is Noble Refine located in Sukhumvit Soi 26 which has an average selling price of 95,000 baht/sq m and a total of 217 units ranging from 31.67 to 70.88 sq m.

The second project, The Seed – Musee, is also located in Sukhumvit soi 26 and has an average selling price of 105,000 baht/sq m for its 138 units ranging from 33.41 to 67.41 sq m. This project has sold out.

Mr Phanom mentioned some factors propelling sales in these dicey times, one of which is extremely low bank interest rates that make the purchase of a condominium for 5-6% rental return look quite attractive.

LIGHTS STILL SHINING: The Bangkok condo market has performed better than might be expected.

Some buyers also expect prices to climb in the two to three years it will take for these new projects to be completed and see a down payment of 15-20% stretched over this period as quite affordable.

“Land prices are not dropping. Land plots – especially in the city near the railway lines, including Sukhumvit – are not any cheaper than they were early this year or last year. Prices are definitely not dropping, and more importantly, plots are not available.”

Aside from this, construction costs will soar should oil prices rise, driving future prices up.

It is also becoming increasingly clear that the lifestyle of city folk is changing with the convenience of travelling by train. Mr Phanom said he had recently moved from his house in the Rarm Intra area to a condominium in Phahon Yothin because his children can now make it to school on their own.

“Condos are a best seller in Bangkok because if you buy a house the locations get farther and farther away, and traffic is bad. The farther it is the more commute time. Previously when I was travelling to and from the Rarm Intra area the expressway was jammed both morning and evening.”

Mr Phanom said some resort markets were in deep difficulty in the first half of the year and mentioned that 95-98% of the property buyers in Samui are typically foreigners but they have disappeared in this period.

However both Samui and Phuket have seen a positive turn over the past two months, with some clients now popping in to look at 30-, 80- or even 100-million baht villas. This is better than in the first half, when few came to look around and none decided to buy.

“Pattaya faces a similar situation, because 90% of the property there is targeted at foreigners.

“When there aren’t any foreign buyers Thais too won’t buy either,” he added.

The Thai market in both Rayong and Hua Hin has improved however, after also turning quite bad in the first quarter.

Looking ahead Mr Phanom expects all property markets in Thailand to perform better next year – if the economy picks up speed.

“Looking back five to six years when the condo market really expanded, the capital gain, particularly for condos, was 10-15%. This applies especially to speculators who booked and flipped their contracts when the building was almost completed. I have to say they almost doubled their profit. They invested 15% maximum and doubled that.”

Despite the economic difficulties these speculators remain active in the market, although there are fewer of them.

“These people have money, some have turned speculation into a profession. We met many people who bought units and after taking transfer ran around trying to sell them or rent them out. They were active in many projects, buying five to 10 units and selling them.

They continue to speculate, although they may be buying less – instead of five units, maybe two.”

Ultimately the health of the property market depends on politics, with this especially affecting foreign buyers.

Mr Phanom said all the foreigners Knight Frank Chartered has dealt with have complained about the political situation, and they fear that any further turbulence will destroy any capital appreciation they might see otherwise.

The mindset of Thais differs, he said, because the majority have nowhere else to go and regardless of what happens they would continue to need a place to live.

SOURCE: Bangkok Post

The first project will be the 500-million-baht Colory Vivid budget condominium located on one rai on Soi Pracha Rat Bampen 6 in the Ratchadaphisek-Huai Khwang area, around 280 metres from Huai Khwang MRT station, said the company’s managing director Chaiyapong Vechamamontien.

The eight-storey building will have 190 units sized between 27 and 57 square metres and priced around 60,000 baht per sq m or between 1.59 million and 3 million baht per unit. The project, to be launched tomorrow at the House & Condo Fair at the Queen Sirikit National Convention Center, is expected to be 50% sold at the fair.

Construction is scheduled to be completed and the units transferred to buyers in June 2011.

The second project will be an 800- million-baht low-rise condominium on Soi Sukhumvit 40, with a launch likely late this year.

According to Mr Chaiyapong, a future project would be located in the Phahon Yothin area and worth around 450-650 million baht for development next year.

Established in September with registered capital of 100 million baht, One Property Development is 30% held by Mr Chaiyapong, the owner of the branded sportswear manufacturer Liberty Group, 25% by Sirinapa Sawanglum, the owner of Sirinapa Diamond; and 15% by Kuna Vitayatanagorn, the second son of the owner of Thai Vegetable Oil Plc, the maker of A-ngoon soybean cooking oil.

According Mr Chaiyapong, the financial status of each shareholder is very strong. For his part, his garment business is expected to have a turnover of around US$120 million by the end of the year, a rise of 15% from last year despite the country’s export slump.

However, One Property Development plans to apply for project loans from Bangkok Bank and TMB Bank to finance new development projects with a target debt-to-equity ratio of 1:1 to 1.5 times.

The project will have the property brokerage and consulting firm Century 21 as a consultant and sales agent. Target buyers will be both end-users and investors, said Mr Chaiyapong.

“But what we’re worried about is not the company’s financial strength, but a possible shortage of labour over the next 10 years,” he said.

“The government thus needs to ease existing regulations on foreign workers to enable local developers to legally recruit labour from Burma, Laos and Cambodia.”

SOURCE: Bangkok Post

The new subsidiary will cover all aspects of building management from providing decorating services to management support services for the re-sale and rental of units at The Prime 11.

James Duan (pictured), CEO of Fragrant Property said Fragrant Property Management was set up to assist with any problems buyers might face after transfers, and to provide residents with a quality management service that would add long-term value to their product.

“We don’t want to be just a developer and seller of condominiums, we also want to provide a caring service for residents – to treat them like our family members. I’m confident that the extra services we provide will be popular with our residents and set us apart as a quality management service provider. We intend to offer this kind of management service at all projects we undertake,” said James.

Kittiphun Ouiyamaphan, general manager of Fragrant Property Management said the company would focus on four key areas, including: interior design; general property management – including the running of the property´s business and fitness centres; investment advice on selling or renting out units; and a customer relations service to provide all-round assistance to residents at The Prime 11.

“We intend to provide the same service at all our projects, namely, Fragrant 71, which is already complete, The Prime 11, and Circle, which is expected to be completed by the end of next year,” said James.

The Prime 11 is located in Soi 11, Sukhumvit Road, only 300 metres from Nana BTS station, and just five minutes from the nearest MRT subway station at Asoke. Major shopping malls, including The Emporium and Central Chidlom are only a few BTS stops away.

There was a limited amount of new letting but only a few cases of downsizing. For multinational companies, which make up the majority of demand for office premises, restrictions on any capital spending meant that they were unlikely to move. The capital costs of relocation which include about THB 2,000/m2 to reinstate existing premises and new fitting-out costs of about THB 15,000/m2 mean that it is often not worth relocating to get a slightly cheaper rental unless the size requirement has been significantly reduced. The completion of the Energy Complex in the second half of 2009 will have a significant effect on other buildings in the northern corridor. The Energy Complex has been fully let to PTT and its subsidiaries who will be relocating from other buildings in the northern corridor. Apart from the Energy Complex, only three buildings will be completed in the next three years. Sathorn Square (73,584 m2) in 2010, Sivatel (5,880 m2) in 2010 and Park Ventures (28,000 m2) in 2011. Any recovery in the economy will lead to an increase in demand and, with limited new supply, rents will rise.

Bangkok Office Supply, Demand and Vacancy
We do not expect that developers will start construction on new office projects until rents increase. The remaining future development in 2009 is the Energy Complex, which is located in the Non-CBD area and will increase the total Bangkok office space by 119,000 m2. This development is already 100% committed and will be occupied by subsidiaries of the PTT Group and the Department of Energy. The project is located on Vibhavadi-Rangsit Road and is expected to be completed in the second half of 2009. Sathorn Square and Sivatel are both scheduled to be completed in the mid half of 2010. The total lettable area for both projects combined is 79,464 m2. In 2011, Park Ventures is projected to be completed. The project is a mixed-use project which will have an estimated 28,000 m2 of office space and will also have a hotel. The completion of Park Ventures will bring the total office space in Bangkok to 8,090,899 m2 in 2011.

Occupancy
The occupancy rate for Bangkok office market increased slightly to 86.0% from 85.8% in Q1 2009. The higher occupancy rate in Chamchuri Square has been the source of improvement for the Bangkok offices occupancy rate. The opening of Energy Complex could increase the vacancy rate when it first opens, however, we are expecting the buildings to be fully-occupied by the first half of 2010. The occupancy rate in the CBD area has improved to 86.7% from 85.5% in the last quarter. In contrast, the occupancy rate of Non-CBD areas dropped from 86.1% to 85.3 for this quarter.

Supply
As of Q2 2009, the total office supply remained at 7,864,435 m2, a 3.9% increase y-o-y with no increase in the quarter. The majority of the office supply in Bangkok was Grade B, representing 77.3% of total supply in the market. Grade A office supply was 1,788,471 m2, while Grade B office supply stood at 6,075,964 m2. Grade A office supply will grow with the completion of the 119,000 m2 Energy Complex, the only new supply to be added in any grade, during the second half of the year.

Net take-up during this quarter improved compared to Q1 2009, at 13,524 m2. This was an increase of 57.1% q-o-q but a fall of 63.5% y-o-y. There was 1,100,623 m2 of vacant space. The source of growth in take-up during Q2 2009 was largely driven by DTAC which completed its move to Chamchuri Square occupying 61,000 m2 and vacating 35,000 m2. For the Grade A space in the Non-CBD area, we expect to see growth when companies move into the Energy Complex by the end of 2009 and in early 2010.

There were some companies which downsized but, in many cases in Bangkok, it is cheaper to remain in existing premises because of the high cost of relocation.

As of Q2 2009, the overall office market rents were moving downwards. Grade B CBD rents recorded the highest fall, from THB 538/m2 in Q1 2009 to THB 514/m2, falling 4.5% q-o-q and 11.4% y-o-y. Grade B Non-CBD rents also dropped 2.7% q-o-q to THB 440/m2. This quarter has shown a consecutive drop in overall rents continuing from Q1 2009. Grade A office rents in both CBD and Non-CBD areas fell. Grade A CBD rents fell from THB 710/m2 to THB 700/m2, down 1.4% q-o-q and 5.7% y-o-y. Grade A CBD rents have now fallen by 5.8% in the first half of 2009. Grade A offices in the Non-CBD faced a drop in rents of 1.2% q-o-q and 2.8% y-o-y to THB 583/m2.

Outlook
Although demand remained weak there was 13,500 m2 of growth in the total amount of occupied office space in the second quarter. Net take up for the first half of 2009 was 22,131 m2. Any recovery in the economy will lead to an increase in demand and, with limited new supply, rents will rise.

SOURCE: http://i-marketingasia.com/cbre/thailand-property/market-view-bangkok-office-quarter-2-2009-2/

The group, an authorised dealer for Mercedes-Benz, Nissan and Jeep/Chrysler, is also to invest billions of baht in real-estate development projects to cash in on its many potential land banks in Bangkok, said senior executives.

Timed to coincide with BKK’s 17th anniversary, the 30-million-baht initiative is updating Mercedes-Benz showrooms and service centres to conform with the luxury car brand’s standards. The rebranding is also introducing “For Today’s Better Living” as a marketing slogan and covers investment in software and personnel development.

The rebranding is aimed at improving the group’s long-term business results and will focus on total quality management (TQM) strategies, to provide a service defined by quality rather than quantity, said president Rienchai Likitplug.

Despite the worldwide downturn and the automotive industry slump, the group’s revenue grew 5% in the first seven months this year. It expects to achieve 3 billion baht in consolidated revenue by the year-end, compared with 2.7 billion last year.

“This could largely be attributed to the high purchasing power of high-end customers and the continuous development of the products and services offered to the customers in the past 17 years,” said Mr Rienchai.

Under its business consolidation, BKK Group has become the holding company of several subsidiaries, including Benz BKK Co and Benz Vipavadee Co, authorised dealers of Mercedes-Benz; Siam Nissan BKK Co, the authorised dealer of Nissan; BKK Auto Mall and Leasing Co, the car financing arm; BKK Chrysler Co, the authorised dealer of Chrysler; and BKK Grand Estate Co, the developer of real estate projects.

The group no longer sells Jeep/Chrysler products but continues to provide repair and maintenance services.

BKK Group plans to develop a high-rise condominium on nine rai of land opposite Bitec on Bang Na-Trat Highway. Construction will begin at the end of this year and be completed by mid-2012, said Anupong Likitpurkpaisan, the group’s executive director.

“Property development is not new for the group as it earlier invested between 10 million and 100 million baht to develop a few townhouse and single-house projects upcountry.” said Mr Anupong.

The group expects to sell 400 Mercedes-Benz and 300 Nissan vehicles this year. “Since Mercedes-Benz and Nissan are due to launch many models at the end of this year, the group believes the launch could help stimulate the automobile market’s growth,” he said.

“We the organisers have always kept out of the judging process to ensure fairness and transparency. And in the previous three years we have had good reason to keep the names of the judges anonymous. In fact, previously the judges never met and therefore never knew who their fellow judges were. This year, following feedback we received, we have decided to announce who the judges are,” commented Duncan Worthington, Managing Director of Ensign Media and organisers of the Thailand Property Awards.

The judges are chosen for their experience, covering a variety of disciplines and nationalities, and each is required to act in a fair and ethical manner and according to the awards´ rules, if there is a conflict the relevant judge will withdraw from discussions on that award.

The panel of judges for the 2009 Thailand Property Awards, include: Kittisak Aguru (Principal Architect – Robert G. Boughey and Associates Co., Ltd.), Gary Biesty (Managing Partner of Mayer Brown JSM´s offices in South Asia), Ian Hamilton (General Manager – Business Development TICON Industrial Connection PLC), Fergal G Harris (Head Of Commercial Real Estate for South East Asia, Standard Chartered Bank), Simon Landy (International Valuation Standards Board), Kris Limcharoen (Chief Executive Officer, Limcharoen Hughes & Glanville), Leong Choong Peng (Managing Director, Davis Langdon & Seah Thailand, International Partner, Davis Langdon & Seah International), Dr. Sopon Pornchokchai (President, Agency for Real Estate Affairs), Charin Satchayan (Partner, LS Horizon Limited), and Associate Professor Dr. Sonthya Vanichvatana (Chairperson of the Department of Real Estate, Martin de Tours School of Management Assumption University).

The panel of judges will meet to discuss this years entries and together will short-list up to five in each category. For the condo and villa awards, the short-listed developments will then be contacted and visited by a separate team of local judges. For example, a team of local judges in Hua Hin will visit the Hua Hin developments, and a local team in Samui will visit the Samui developments, etc. It is the local teams that will then decide on the winner for each of the relevant condo and villa development award.

The remaining awards will be decided upon by the central panel of judges who will select a winner from the short-lists previously made.

“The entries are very competitive again this year, and I don´t envy the panel of judges their task. Analysing and discussing each entry takes time and I wish the judges the best of luck in their deliberations,” added Worthington.

BDO Richfield Advisory Limited have been contracted to oversee the entire judging process to ensure all is fair and transparent. A BDO representative will be present during all panel.

by Duncan Worthington
SOURCE: Property-report.com