Report by CBRE
Images: courtesy of Kulwadee Sawangsri
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Asia’s real estate markets are outperforming the slowing US and European markets. The main countries benefiting from this trend have been the larger markets such as Japan, Hong Kong and Singapore, and there is now an increasing focus on Thailand, according to leading international property consultants CB Richard Ellis.
Property investment has become a global market with a rapidly increasing number of cross-border transactions.
“Property markets used to be dominated by local investors but this is no longer the case. In many ways, property investment has become similar to the equity markets with investors looking for worldwide opportunities,” said Ms. Kulwadee Sawangsri, Director of Investment Properties at CB Richard Ellis Thailand.
Many Asian property markets have performed strongly over the last two years and international investors now see the possibility of Thailand outperforming regional competitors.
Last year, office rents in Singapore doubled, whereas there was almost no growth in office rents in Bangkok. International investors are focusing more on Thailand because they feel that there is more room for growth.
Investors’ confidence in Thailand has improved because of some of the early policy measures of the new democratically elected government such as the removal of inbound capital controls and tax incentives to help the property sector. An escrow law is also being put in place which will facilitate large property transactions.
The Thai market is challenging because there are restrictions on foreign ownership and a scarcity of income-producing buildings available for sale and so most international investors have focused on new development rather than the acquisition of existing assets.
High-end Bangkok condominiums, hotels and residential resort developments have been the most active sectors.
Foreign investors have in some cases formed strategic joint ventures on multiple projects with a Thai partner. For example, Singapore-based Capital Land is in a joint venture with Charoen Sirivadhanabhakdi’s TCC Group and is just completing the Athenee Residence, a luxury condominium on Wireless Road.
IFA Hotels and Resorts, listed on the Kuwait Stock Exchange, acquired a stake in Raimon Land, a Thai publicly listed luxury property developer.
Istithmar, a private equity firm based in Dubai, has agreed to invest in the W Hotel which is currently under construction in Golden Land’s Sathorn Square project.
The resort market was also very active last year, with Hong Kong’s PCPD buying the Thai Muang golf course in Phang Nga and Destination Properties buying two hotels in Phuket.
CB Richard Ellis believes that, this year, investors will be focusing on site acquisition for condominiums, offices and hotels in Central Bangkok. “The mass transit routes have firmly anchored Bangkok’s Central Business District. There is now a scarcity of development sites in the Central Business District and strong competition from developers when freehold sites come on to the market,” added Ms. Kulwadee.
CB Richard Ellis has recently been appointed as sole agent to sell a prime site on Sathorn Road and already strong interest has been shown by potential purchasers.
Meanwhile, in Bangkok’s suburban locations, developers continue to acquire sites for mid-market condominium developments.
Competition will also remain strong for any grade A building that comes onto the market. This is a rare occurrence in Bangkok, where only three grade A office buildings have been sold in Bangkok in ten years, and is because there are relatively few vendors.
Thailand’s resort markets continue to attract investors with the focus being on development because few existing properties are available for sale.
There are large amounts of both Thai and foreign capital looking for real estate investments in Thailand. The limited number of buildings for sale means that many investors will continue to take the development route, with residential properties (for sale) both in Bangkok and resort locations being the most popular.
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Bangkok Serviced Apartment Sector Overview 2008
Compiled by Li Zhou
Report by Colliers International
Colliers Thailand forecasts increased serviced apartment competition and advises operators to refocus marketing strategies. The main findings of the report are:
• After 2 years of uncertainty linked to political issues, the property market in general and the serviced apartment market
in particular is expected to experience renewed activity and growth in 2008.
• At the same time, competition will intensify further as 6,580 new serviced apartment units in 38 projects are set to enter
the market by 2011.
• Total new investment in these 38 projects is estimated at around THB 27 billion.
• Many investors are attracted to this sector by strong income potential combined with lower investment and operating costs and offered higher yields than hotels.
• International operators, such as Oakwood Asia Pacific, Frasers Hospitality and The Ascott Group, are expanding aggressively throughout Asia and all have new properties underway in Bangkok.
• The advantage of a strong brand name, either local or international, will become more apparent in a more competitive environment.
• As new supply outpaces new demand, operators have turned increasingly to shortstay tourists and business travellers, rather than the traditional serviced apartment long-stay market (1-3 months), competing with hotels.
• Some serviced apartments are currently taking in 30-35% long-stay and 65-70% short-stay business.
• With new supply of hotels also increasing sharply, the market
is expected to enter a very competitive phase in 2008.
• With increased supply coupled with licensing requirements
for short-stay operators, a strategy for success could be a return to focus on the traditional longer-stay market. Offering guests staying a month or longer a well-designed product that meets their needs would be preferable to engaging in a price-cutting war with hotels.
• Appreciation of the Baht is putting some Grade A properties outside the budget allocation of some long-stay expatriates, which could benefit the Grade B market in the near term.
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Emporium Lifestyle Home and Residence Show
The Emporium Shopping Complex is holding “Emporium Lifestyle Home and Residence” to indulge all prospects who are searching for their dream home. Get all kinds of offers on housing and condominium projects that fit with the lifestyle you want and irresistible promotional offers from 15-26 May 2008 exclusively at The Emporium Shopping Complex, Bangkok.
For more information please contact +66(0)84 162 4172
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Mission Impossible Star Visits RPM
Hollywood actress Maggie Denise Quigley, from the movie Mission Impossible III, recently visited Gulu Lalvani at the Royal Phuket Marina. Maggie Q, a close family friend of Mr Lalvani, is in Asia to promote her new movie ‘Three Kingdoms: Resurrection of the Dragon”. During her visit she enjoyed an evening dining with Mr Lalvani at “Les Anges” restaurant on the Royal Phuket Marina boardwalk.
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