Bangkok-- Mar 11--CB Richard Ellis (Thailand)
Thailand's strengthening property market is now attracting more investors, according to international property consultants CB Richard Ellis.
All sectors of the property market are improving. In the office sector, vacancy levels have fallen steadily, from 37% in 1999 to 24% at the end of 2002. Office rents have risen over the past two years for both grade A and grade B premises. The condominium sector continues to strengthen, with prices for some projects in the central business district of Bangkok rising above their pre-crisis levels and sales of middle and high-end condominiums growing. The housing sector likewise continues to generate brisk sales for townhouses and single detached houses in the midtown areas as well as in locations that are easily accessible to the city centre.
"These positive indicators are attracting both local and international attention as Thailand is one of the few property markets in Asia where we are seeing growth," said Amy Rodil, Research Director of CB Richard Ellis. The property market in Singapore and Hong Kong are still falling whilst in Japan and Taiwan, investors' focus has been on distressed assets. In Thailand investors' focus was on distressed assets and property-backed debt after 1997; the focus has now changed and there is a recognition of exciting opportunities in new development.
The launch of new projects indicates that Thailand is at the beginning of a new property cycle. Examples of this can be seen in the condominium sector where we have seen solid demand from purchasers. Hampton, a new luxury condominium project, located on Thonglor soi 10,and targeting the highest end of the market, has successfully presold over 20 units before launching. The project is expected to be officially launched in April 2003 with the completed model unit. Almost all buyers are Thai owner occupiers. The units were sold at the highest prices achieved in the Sukhumvit area, averaging more than 70,000 baht per sq.m., and substantially higher than pre-1997 average Sukhumvit prices. There have been no new condominium development project in the Sukhumvit area for more than 5 years.
Baan Rajdamri, a luxury development by Sansiri, has reportedly sold 60% of this 32-unit, 26-storey project along Rajdamri Road. The achieved prices are over 100,000 baht per sq.m.
So far, new investment has been coming mainly from local developers and activity is increasing further as some existing Thai property companies complete their restructuring. The growing market has also attracted new Thai investors to acquire existing assets, driven by the low rate of return from other types of investment.
The confidence in the market by local developers can be seen from Central Pattana Plc's acquisition of the World Trade Center project and the company's commitment to complete the office tower and fully refurbish the shopping centre. This increased confidence is further demonstrated by the commencement of construction of the 350,000 sq.m. Siam Paragon retail project on Rama I Road.
According to Khun Aliwassa Pathnadabutr, Executive Director at CB Richard Ellis, there is growing interest in the Thai property market from foreign individuals and from international institutional investors both in equity investments in property companies and directly participating in the market through property funds.
Over the last 5 years, there has been increased overseas participation in the Thai real estate market from institutional investors such as GIC of Singapore which has some equity stake in Land & Houses and Quality Houses.
Some regional investors facing weaknesses in their own markets are becoming more interested in Thailand as they realise that it is one of the few markets in Asia that is now at an upward stage of the property cycle. Overseas investors are not just interested in distressed assets but are also focussing on new developments.
To date, CB Richard Ellis have seen that foreign individual buyers prefer existing condominiums rather than projects sold off-plan. There has been strong foreign interest at Langsuan Ville, located along Langsuan Road in the Central Lumpini area, where the average achieved price is 80,000 baht per sq.m. There is only one unit left from the total of 50 units offered for sale in this project. The buyers purchased the units for both owner occupation and investment.
Interest from both local and foreign individual buyers has likewise been strong in Kallista Mansion on Sukhumvit 11. This project has offered 61 units for sale early this year, of which more than half have been sold to date. The majority purchased the units for investment as these units are currently tenanted and enjoy the highest rents in the Sukhumvit area.
With the strong sales performance of newly launched as well as existing projects, rising prices and the continuing increase in occupancy levels of existing developments, increased developer activity is anticipated in the coming year. This will be more pronounced in the residential sector, particularly for condominiums, single detached houses and townhouses, but there will also be renewed interest in other sectors such as office, retail, hotel and industrial.
CB Richard Ellis believe that many local and overseas investors now recognise that Thailand is now at the rising wave of the new property market cycle. The focus has shifted from distressed assets to new property developments. End.
-PM/SN-
