Overall investor sentiment in 2010 was positive – a marked change from 2009 when there was very little investment activity.   Last year was very active for land sales, with transactions concluded by CBRE in excess of THB 1.5 billion.  The large stock-listed developers were particularly active and a number of land in the core Wireless Road and Ploenchit area were sold at prices well over THB 1 million per square wah.

CBRE handled land sales transactions for many of Thailand’s biggest developers, including Pruksa Real Estate Plc. and Noble Development Plc.  Developers focused not only on the established areas in Bangkok and sites close to mass-transit stations, but also on areas located along the mass-transit extensions and less developed areas in the centre of town, including Rama IV Road, Petchaburi Road and Si Phaya Road.  Private investors were also active, particularly in seeking land plots of 1 rai – 2 rai, primarily in the established core areas of Bangkok.

Ms. Kulwadee confirms that developer interest remains strong for well located land plots, particularly either in the centre of Bangkok or along the mass transit routes.  Developers looking to launch condominium projects continued to focus on the areas close to BTS stations between National Stadium station and Ekamai station (along the light green line) and between Ari and Chong Nonsi (on the dark green line).   In addition, developers adopted a similar approach when acquiring land along the MRT route.  Developers also looked at sites along the extensions of the existing BTS and MRT routes and many have already acquired significant land holdings in these areas.

Although there will be continued interest in many of the emerging areas along the BTS and MRT extensions, a number of developers are starting to be cautious about the number of condominium developments focusing on this segment of the market.  Overall, the outlook for 2011 is positive and we have already seen healthy levels of demand across all sectors.

In 2011, CBRE expects that investor interest will continue and that developers will narrow their search to suitable land plots in established areas.  Depending on the nature of the project, the traditional prime central areas including Wireless, Ploenchit, Sukhumvit, Rama I, Rajdamri, and Sathorn Roads are most in demand, as they are suitable for the development of residential, commercial and hospitality projects.  The optimum plot size is normally between 2 rai and 5 rai in order to allow for a high-rise project without it being too large to develop in one phase.

CBRE expects land values for prime locations to continue to appreciate as there are fewer land plots available. CBRE has started to market the Alliance Francaise site on South Sathorn Road. The land plot, which is 3 rai and 89 square wah, has over 80 metres of frontage to South Sathorn Road and will be sold by formal tender subject to the French Government remaining in occupation for one year after transfer to allow them time to move to a new site. CBRE expects a wide variety of interested parties because the site is suitable for both commercial and residential development.

There have been concerns about an influx of foreign money into Thailand. There have been significant foreign inflows into the Thai bond and stock markets but virtually no significant foreign investment into the Thai property market. In fact, we have seen the opposite with foreign groups, such as the administrator of Lehman Brothers and a fund controlled Lasalle Investment selling properties to local Thai investors.

Although the Bank of Thailand increased policy interest rate on 1st December 2010 by 25 bps to 2.0% per annum, yield for property investment did not change significantly and money is still being driven into the property market due to the low yields on other fixed income investment.

Income-producing properties are still in high demand amongst Thai investors. When income producing properties have come to the market, there have generally been multiple bidders demonstrating the continued level of demand for this type of property.

This is an extract from Thailand Investment MarketView Q4 2010, click to download the full report.

Demand for land in traditional prime central Bangkok areas such as Wireless, Ploenchit, Sukhumvit, Rama I, Rajdamri and Sathorn roads is continuing to grow this year on rising demand for residences in these locations, according to international property consultant CB Richard Ellis (CBRE).

The company’s research said the optimum plot size is normally between 2 and 5 rai (3,200 – 8000 square metres), to allow for a highrise project without it being too large to develop in one phase.

CBRE expects land values for prime locations to continue to appreciate as there are fewer plots available.

Kulwadee Sawangsri, executive director and head of CBRE’s investment and land services, believes more office buildings were sold in 2010 than in the previous five years combined.

During the year, CBRE’s investment and land team handled the sale of six office buildings with a total value in excess of Bt5.6 billion. The types of building varied considerably, ranging from freehold and leasehold office investments to freehold offices sold with vacant possession after large companies decided to dispose of noncore assets.

Overall investor sentiment was positive, a marked change from 2009, when there was very little investment activity. Last year was very active for land sales, with transactions concluded by CBRE in excess of Bt1.5 billion.

Large stocklisted developers were particularly active and a number of plots in the core Wireless Road and Ploenchit area were sold at prices well over Bt1 million per square wah (Bt250,000 per square metre).

CBRE handled land sales transactions for many of Thailand’s biggest developers, including Pruksa Real Estate and Noble Development.

Developers focused not only on the established areas in Bangkok and sites close to masstransit stations, but also on areas along the masstransit extensions and less developed areas in the centre of town, including Rama IV Road, Phetchaburi Road and Si Phaya Road.

Private investors were also active, particularly in seeking plots of 12 rai, primarily in the established core areas of the capital.

Kulwadee confirmed that developer interest remained strong for welllocated plots, particularly either in the centre of Bangkok or along the masstransit routes. Developers looking to launch condominium projects have continued to focus on the areas close to BTS Skytrain stations between the National Stadium and Ekkamai stations and between Ari and Chong Nonsi.

In addition, developers adopted a similar approach when acquiring land along the MRT subway route. Developers also looked at sites along the extensions of the existing BTS and MRT routes and many have already acquired significant landholdings in these areas.

Although there will be continued interest in many of the emerging areas along the BTS and MRT extensions, a number of developers are starting to be cautious about the number of condominium developments focusing on this segment of the market, she said.

Overall, the outlook for 2011 is positive and the company has already seen healthy levels of demand across all sectors.

Contact CBRE for more info. on Thailand Land Sales or Investment Property for sale

Bangkok land for sale

Land area: 3 rai 89 sq.wah.

Frontage: Approx. 82 m.

Zone: Red zone (commercial area)

The benchmark interest rate remained the same during Q2 2010 at 1.25% per annum, increasing by 25 bps in July 14th 2010. This level of interest rate has not affected property yields. Yields will remain unchanged until we see significant increase in bank deposit rates or government bond yields.

Developers continued to acquire sites for condominium developments. Noble Development Plc. has reportedly acquired the remaining 6.3 rai of Raimon Land Plc.’s Ploenchit site for a price of around 1.2 million Baht per square wah. This is a record price for this size of transaction.

With regard to major property transactions, the most notable investment transaction was the sale of Dusit Laguna Phuket by Laguna Resorts & Hotels Plc. to Dusit Thani Plc. in August 2010.

There were two office building transactions, Fenix Tower and Pacific Place I & II were sold. Fenix Tower was sold by ING to Rangsit University. The Pacific Place towers I & II were reportedly sold by the administrator of Lehman Brothers’s assets to Thai Property Plc.

Future Park Bangkhae was the largest retail space transaction in Thailand. It was sold by Thai Asset Management Corporation (TAMC) to Seacon Development.

In relation to property funds, the average dividend yield of property funds during Q2 2010 was 7.4%. The Thai Commercial Investment Fund (TCIF) was the only new property fund listed on the Stock Exchange of Thailand. There are plans to launch five new property funds in Q3 2010, with a total market capitalization of around 6.4 billion Baht. Most property funds traded on the Stock Exchange of Thailand are trading below their NAV (except CPNRF, TCIF, TLOGIS and FUTUREPF).

This is an extract from Thailand Investment MarketView Q2 2010, click to download the full report.

Japan was the most active market in terms of volume, accounting for 29% of total investment in the region. The US$8.8 billion worth of transactions completed in the country during the first six months of the year, a rise of 62% year-on-year, was only slightly below the all-time high recorded in the first half of 2007. There was a steady flow of small and medium sized transactions involving the acquisition of assets in Tokyo as the period witnessed growing interest on the part foreign investors looking to return to the market and expand their Japanese portfolios.

Land acquisition by developers increased significantly in the second quarter in Thailand. Buyers were condominium developers and AIA purchased a site from the Stock Exchange of Thailand to build an office building. Two completed buildings, the Future Park Bangkae and Fenix Tower were sold to local investors.   There was no decrease in prices despite the unrest in Bangkok in April and May.  The appetite from developers to acquire sites and investors to buy building increased in June.   The Thai property market continues to be dominated by local investors and developers with very little foreign interest.

Hong Kong, South Korea and Taiwan all posted a strong quarter-on-quarter increase in transaction volume in the second quarter, rising by 33%, 81% and 79% respectively, as high net worth individuals and domestic buyers continued to display a strong appetite for prime investment property. Hong Kong recorded US$3 billion and US$4 billion of real estate investment transactions in the first and second quarter respectively, such that the aggregate total for first half year was approximately US$7 billion.

Korea witnessed a tepid start to the year but enjoyed a more active second quarter as a number of major acquisitions of office assets were completed in Seoul, collectively accounting for 95% of transaction volume. Total investment concluded during the second quarter reached US$1.5 billion, up 81% from the preceding quarter. In Taiwan, end-users and local insurance companies completed a significant number of acquisitions within the same time frame, with investment sales totalling US$951 million in the second quarter, up 79% from the US$532 million recorded in the first quarter.

In contrast to other major investment destinations in Asia, China registered a sizeable decline in transaction volume of 87% quarter-on-quarter in the second quarter as a series of cooling measures implemented by the government to expand housing supply and squeeze speculators.

The relatively small flow of deals which were completed during the period were largely accounted for by domestic investors.

“The region is experiencing an uneven recovery and the persisting mismatch between sellers’ expectations and buyers’ risk tolerance will continue to restrict market activity in the second half of 2010,” said Mr. Andrew Ness, Executive Director of CBRE Research Asia.

“However, the relatively steady level of activity witnessed in the first half could potentially be matched in the second half and total investment volume in Asia for 2010 could therefore reach around US$60 billion,” added Mr. Ness.

That said, the high level of outstanding corporate and government debt remains a cause for concern and continues to be viewed within the region as a potential downside risk. Nevertheless, the steady level of acquisition activity by both institutional investors and REITs, which jointly accounted for over US$5.6 billion or 43% of the total investment recorded during the second quarter, demonstrates that the Asian real estate investment market remains generally buoyant, although expanding at a slower pace than originally forecast.

Values of prime land plots in the central Phloen Chit area have risen above 2008’s record levels to a new peak of 1.5 million baht per square wah. Sansiri Public Company Limited acquired 2-rai plot adjacent to the American ambassador’s residence on Wireless Road. The total transaction value was 1.2 billion Baht and Raimon Land have apparently sold 2-3-42 Rai out of a total of approximately 9 Rai on their Ploenchit site.

Thai Commercial Investment Fund (TCIF) plans to launch a freehold property fund investing in the Nation Tower Building which consists of 3 office buildings and 1 car park building in Q2 2010. The subscription period for the IPO was from 15 – 23 March 2010. The fund has a market capitalization at IPO of approximately THB 1.96 billion with par value of 10 baht per unit. The fund will offer a minimum guarantee return of 4-5% for three years.

In the first quarter of 2010, the Thai economy continued to improve with many economic indicators showing a V shaped recovery. The National Economic and Social Development Board expected GDP in this quarter will increase around 6% Y-o-Y. Thailand’s Equity markets have gained about 7% from the beginning of the year (S.E.T. Index increased from 735 to 788).

Outlook

Investor sentiment in the first quarter improved, contributed by developers’ new project launches and lending competition among financial institutions. Condominium sales in the mid- to high-end segments continued to grow especially in downtown areas or in areas near mass transit routes. We also saw development companies LPN, Sansiri and Noble sell out over 3,300 units in four condominium projects in 2 days which highlights the demand for condominium units in Bangkok.

Foreign investor interest in the Thai market is limited due to the political instability.

In Q1 2010, the government has agreed to extend some of the incentives measures for two months to stimulate the property development sector, the full package of incentives was due to end on March 28. The decision was made because approximately 10,000 people who had bought their homes might not be able to transfer their property right before the expiry date of the tax incentive measures.

This is an extract from Thailand Investment MarketView Q1 2010, click to download the full Thailand property investment report.

There was an increase in the number of building transactions in Q4 2009. The most notable transactions were TPARK LOGISTICS PROPERTY FUND (TLOGIS) and CIMB Thai Bank. TPARK LOGISTICS PROPERTY FUND (TLOGIS) bought 15 warehouses with usable area of 70,731 square meters from Ticon industrial PLC, for THB 1.53 billion. According to a company report to the Stock Exchange of Thailand, CIMB Thai Bank sold its office building on North Sathorn Road for THB 1 billion to an unknown buyer. TCC Land bought the Peugeot office building on Surawong Road for THB 800 million according to the Prachachart Turakij newspaper. Pacific Star International (Thailand) announced that had sold 8 penthouses at The Sathorn Gardens condominium development covering 3,700 square metres to a single investor for around THB 100 million.

Q4 saw two major land transactions; L.P.N. Development Public Company Limited bought land in Bang-Krapi, Bangkok (7-1-70.1 rai or 2,970 sq.m.) for approximately 222.75 million Baht. Ek-Chai Distribution System Co., Ltd. (Tesco Lotus) purchased land in Kao-Yai Market Village project (26-3-14 rai or 10,714 sq.m.) from Siam Future Development PLC. 198 million Baht (equal to about THB 18,480 per wah).

Bangkok is now seeing upward trends in the property market; this is supported by a more positive outlook in the local economy (GDP turned positive to ~ 3.5% in Q4) an improvement of 63% in Thailand’s equity market from Q1 2009. The SET index increased from 450 in Q1 to 735 in this quarter.

Property Funds
During Q4 2009, property funds offered investors annualized yield of around 4.90% to 11.94%. TPARK Logistics Property Fund (TLOGIS) was listed on the Stock Exchange of Thailand during the quarter. The fund, worth 1.53 billion baht, is a specific property fund with an unspecified project life and par value of 10 baht per unit. It invested in freehold 15 warehouses with a usable area of 70,731 square meters, located on TICON Logistics Park Wangnoi (48-3-32 rai), Ayudhya Province and TICON Logistics Park Bangna, Chacheongsao Province (41-1-80 rai). The fund will offer a minimum guaranteed return of 7% for 7 years.

This is an extract from Thailand Investment MarketView Q4 2009, To download the full Thailand property investment report.

Asian real estate investment markets recovered strongly in the second half of 2009 after enduring a difficult start to the year. Investment turnover bottomed out in the first quarter but improved thereafter as investor confidence returned, underpinned by low financing costs, the recapitalisation of private and public real estate funds/investors and the stabilization of prices across key markets. Direct real estate investment in the region jumped 56% y-o-y in the second half of 2009 to an estimated US$25 billion. The rising value of investment transactions in the second, third and fourth quarters of 2009, indicating the emergence of a consistent trend as opposed to a one-off improvement. Despite the relatively high turnover in the second half, the overall transaction volume of US$38 billion for 2009 was still 22% lower than that recorded in the previous year.

The period saw almost every Asian market record an increase in investment activity on a half-yearly basis. Renewed activity by domestic investors ensured Hong Kong was the most active market, accounting for US$7.3 billion or 29% of the regional total in the second half. China, Japan and Singapore also witnessed a strong rebound in investment activity, accounting for 22%, 17% and 10% of the total volume respectively.

Easier access to local lending facilities and leverage provided domestic real estate funds and investors with a competitive edge, allowing them to dominate the Asian investment market in the second half of 2009. Domestic and intraregional investors accounted for 83% and 15% of total volume respectively during the review period. The amount of interregional cross border investment activity accounted for just 2% of the total investment volume, down from the 4.5% recorded in the first six-months of 2009 and significantly behind the usual 16% to 30% of total investment activity recorded in recent years.

Visit CBRE Research to download full report or contact CBRE Investment for more information.

There was a very worrying article in the Bangkok Post on February 3^rd suggesting that Ford would shift new investment to other countries unless the Thai government resolved issues at Map Ta Phut.

Initially the problems were limited to the Map Ta Phut Industrial Estate where the Administrative Court issued an injunction to suspend 76 industrial projects valued at 400 billion baht because environmentalists had argued that the approved permits violated the constitution.

This mainly affected the Petrochemical sector.

The article suggested that Ford is scheduled to sign a contract with Hemeraj Land and Development for land on which to build a 20 billion baht car plant but if talks including environmental issues are not finalized by the middle of this month then the company may change its investment location.  The location is in Hemeraj’s Eastern Seaboard Estates not Map Ta Phut.

The fall out from Map Ta Phut has now spread beyond the petrochemical sector.

Attracting car manufacturers to Thailand has been a great success story but past this success is now being threatened by uncertainty over the permit process.

There is no argument about the benefit of good environmental controls.  No country wants to be the base of dirty and dangerous industries that are not acceptable elsewhere.

What is needed is a clear and predictable permit process where manufacturers know if they follow the rules they will get the necessary permits.  Certainty is required to continue to attract investors in manufacturing plant not a set of moving goal posts.

Driving around Bangkok or viewing the city using Google Earth reveals a large number of empty land plots that one would not see in other cities.

Traditionally Thais have invested in land as a long term asset even willing to hold the land for several generations without realizing any return apart from the capital gain.

Unlike other countries there is almost no holding cost for vacant land.  Local property taxes are minimal and there is no inheritance tax.

Currently there is a tax on rental income which is set at 12.5%.  Leases in Thailand are often split between rent, services and fixtures to reduce the landlord’s liability for household tax.

The Democrat administration seems intent on reviewing the current taxes on property.  The Finance Minister Korn Chatavanij suggested that a draft would be proposed for consideration by the cabinet in the first quarter.

We understand that the new proposed new tax would impose an annual charge on land assets and property nationwide with local administrations given flexibility in setting rates.

Rates would very depending on use.  Owners of vacant unutilized land would possibly face a sliding scale with taxes increasing each year the land remains unutilized.

Imposing a tax which creates a holding tax for land would be a radical move.

We think the intended results are to broaden the tax base and to encourage more efficient land use.

Taxes should be equitable, economic and efficient they should be fairly spread over the population, achieve economic goals and be easy and cost effective to collect and enforce.  Property has always been a popular asset to tax by governments because it is visible and in countries like Thailand with widespread land registration there are good records.

The devil will be in the detail and effectiveness of enforcement.

A well written and enforced act could increase revenue for local authorities on both income producing buildings, owner occupied buildings and vacant property and land.

If there is a high tax burden on unutilized land then this may pressure some landowners to sell as they might be asset rich but cash poor.

The unintended consequence may be that there is a rush to develop land or sell to developers this might create oversupply.

If the law does come into effect then I am also sure we will see some landowners trying to minimize their tax liability perhaps by claiming the land is being used for agricultural purposes even though it is in downtown Bangkok.

The new land tax law has the potential to change the dynamics of the Thai property market but we shall have to wait for the exact details of the contents before we can forecast the possible impact.

Q3 saw two major land transactions, both by Pacific Assets Public Co. Ltd and with a total value of over THB 1.2 billion. Pacific Assets bought 1,766 square wah of land in the Sathorn area from the Maternity & Child Welfare Foundation for THB 750 million. They also purchased 10 parcels of land totaling 4,851 square wah on Rama Indra Road.

Property firms including Preuksa Real Estate, Land and Houses, Sansiri, LPN Development, Noble Development and Asian Property Development have increased their investment budgets for land acquisition between now and the end of the year. They intend to develop residential projects next year and in 2011, believing that the economic climate will be more positive in 2010.

Real estate investment activity has increased in Q3 2009. The Thai stock market saw a 60% improvement from Q1, rising from 450 to 720 in quarter three. The announcement of the Governments’ second economic stimulus package worth THB 1.43 trillion was a contributing factor in the improved confidence in the economy.

Outlook

There has been continued demand for development sites for condominiums both in the Central Business District and along the new mass transit routes. There has been no evidence of falling prices for land in the downtown areas.

Many larger, well capitalized property development firms have revised their investment strategies on the back of better than expected sales results. Property firms including Preuksa Real Estate, Land & Houses, Sansiri, LPN Development, Noble Development and Asian Property Development have increased their investment budgets to buy land between now and the end of the year for the purpose of developing residential projects next year and in 2011, believing the economy will strengthen in 2010.

There remains very limited foreign interest in the Thai market, as most foreign investors can still find better deals for distressed assets and more liquid markets elsewhere.

Thailand Property Investment – Full Report