Following the political crisis in May, the Bangkok market seems to be back on track in project sales. However, what is happening in the southern resort markets such as Phuket is not as clear to the market,

At present, the majority of transactions in Phuket are concentrated in the lower-end, for example, inland condominiums with easy access to the beach. This affordable market segment continues to generate consistent demand from locals and foreigners with limited budget.

On the other hand, there is a market gap for mid-range products. With a combination of the fragile global recovery and Thai politics, there is a need to re-assess market trends. Buyers’ profile and demand for resort properties have evolved in terms of product requirements and budget. There is a gap for mid-priced quality properties with smaller unit sizes.

In the high-end villa market, there will always be ongoing demand for prime ocean-front properties, but there is also a supply limitation due to lack of prime sites. Prime ocaean-front land prices have held up firmly during the past two years. A recent transaction of a 40-rai ocean-front site near Amanpuri reportedly sold at Bt18 million per rai (a price not far off form peak prices in 2007) clearly demonstrates this.

Product in the new cycle will evolve based on these changing market factors.

In terms of buyers’ profile, Hong Kong and Singapore remain the key markets. Buyers from UK and Europe formed a significat portion of the market, but the pool of buyers from these markets has reduced with weaker European currencies and the global crisis.

The group of active foreign buyers in Phuket are those well acquainted with Thailand. Foreigners new to the market tend to hold off investments for now due tho the uncertain political climate.

On the development side, Thai developers are playing a more active role in Phuket, Many already have strategic land holdings in Phuket and they will be the driving force for resort-market development in the next few years.

With the right fundamentals, Phuket has continued to hold firm on prices driven by limited supply and maintained its leading resort market position backed by its enduring appeal amongst investors. But although the market has shown resilience to politics and gradual improvement in residential sales as global markets recover, we should also look at what regional neighbours are doing.

Bali is one of Phuket’s growing competitors with a direct foreign tourist arrival of 2.2 million in 2009. However, Phuket remains the bigger value market as supply of residential projects in bali is mord limited and there are fewer large-scal projects and choices for purchasers.

Vietnam also has an emerging coastal market in Da Nang and Nha Trang. Development in Da Nang began in early 2000 and currently has an active second home market mainly driven by local buyers. Prices in Da Nang are not for off from Phuket, but with a product quality that is still not comparable.

Lastly, Cambodia’s coastline offers significant potential with superior beach quality and natural resources compared to Thailand on private islands such as Koh Rong. Pioneering investors entering the market now will enjoy entry prices and significant long-term capital gain.

While these resort markets have a hill to climb before reaching Phuket’s status, Thailand should not underestimate their potential. One area Thailand lags behind is in foreign investment policies and ownership structrue. Vietnam offers 50-to 70-year lease terms, Malaysia newly emerging market like Cambodia is offering 99 years. Phuket undoubtedly has an enduring appeal, but it should continually develop to keep in line with the competition.

สัมมนาฟรี  กรุณาลงทะเบียนสำรองที่นั่งล่วงหน้า  ที่นั่งจำนวนจำกัด

ดาวน์โหลดแบบฟอร์มลงทะเบียนงานสัมมนา

ติดต่อสอบถามข้อมูลเพิ่มเติมที่ คุณ จิติมา โทร 02 654-1111 ต่อ 608 หรือ อีเมล์  jitima.sindhusaard@cbre.co.th

The first target markets are Vietnam and Cambodia because of their proximity, level of development and the local competition is not as well developed as the more mature markets such as Malaysia.

There are a wide range of opportunities in the Vietnamese and Cambodian markets from city centre office, retail, residential and hotel developments through to the growing resort markets in these countries as well as industrial estate opportunities.

Entering new markets is always a challenge.  Rules and regulations governing property development and ownership are different.  The dynamics of each of the property sectors in these countries is also different to Thailand.

Accurate information on regulations, supply, demand, pricing, competitors and prospects for each property sector is essential for a Thai developer to succeed in a new market.

CBRE is well placed to advise Thai clients on how to enter these markets.

CBRE established offices in Vietnam in 2003 and now has over 200 real estate professionals operating out of offices in Ho Chi Minh City, Hanoi and Danang.

The research, consulting and marketing teams have already worked with a large number of overseas developers who have successfully built projects in both the main cities and resort areas.

CBRE established and office in Phnom Penh in 2009 and have been advising clients on the Cambodian market for many years before the office opened.  Mr. David Simister, Chairman of CBRE Thailand, Cambodia and Vietnam advised the Australian Government on the acquisition of a new site for their Phnom Penh Embassy in 2005.

“There is very little publicly available information on the Vietnamese or Cambodian markets.  CBRE sells and leases properties in these countries everyday which is why we have the best market data on actual transactions and future supply.  This enables us to provide our clients with the best market data giving them the best knowledge to enable them to succeed,” said Mr. James Pitchon, head of research and consulting for CBRE Thailand.

There are opportunities for Thai developers to acquire or build properties in both Cambodia and Vietnam but accurate market research will be critical in order to succeed.

Not too long ago, property developers in Phuket were extremely optimistic about the future of the resort island and began talking in terms of a “Greater Phuket” market that included the neighbouring provinces of Phangnga and Krabi.

Sadly, the global economic crisis and local political problems have stalled this ambitious push.

David Simister, chairman of the property agency CB Richard Ellis, said recently that the still weak global economic recovery had held back the development cycle on the southern resort island with several projects on the drawing board for the west coast of Phangnga now all on hold.

“Developers haven’t dumped them, they are still waiting for the right opportunity,” he said.

However, he added that the value of end-user units and good land plots  is not so much in question with the key issue being that the number of prospective buyers has declined. “There are buyers and the sales that do take place are at good prices. It’s just that it’s not hte same volume of buyers.”

Although demand has decreased and this has led to a consolidation of the Phuket property market.

Mr Simister believes properties on the island are still a good investment, with no examples of distressed sales during the height of the global economic shakeup.

“Phuket isn’t about short-term speculation, it’s about long-term holding and a combination of use and capital appreciation.”

Rather than expanding into neighbouring provinces, the move now is toward Mai Khao beach on the northerwestern side of the island. Although some major projects were launched on the island’s easterm coast in recent years, the majority of the stock has been completed and there does not seem to be a wave of new developers undertaking projects on that side of the island.

“If I were to draw a value map. I would say the most valuable areas are probably in Surin,” says Mr Simister. “But again, you have to compare like with like. If you are comparing uninterrupted ocean view, hilltop view, promixity to the beach, all thest things will differ project to project but generally you are looking at Kamala, Surn and Bangtao as the prime strip, and values reduce as you go either farther north, east or south.”

Mr Simister says that people who want to buy property in Phuket should do so today because new developments will inevitably be more expensive. It is still a market of limited volume, because all that has happened over the past two years is absorption of property.

While certain that foreign developers will come back to the island once economic and political conditions improve, Mr Simister does not think a foreign developer is an essential ingredient to get a new project going. That has been amply illustrated by the success of Thai developers on the island.

In fact, the entry of well-heeled local developers has been a healthy counterbalance to the tendency earlier of some developers who were selling off-plan and working with minimal capital.

Mr Simister said the reason companies such as Supalai Plc, which recently launched the well-received Supalai Park@ Downtown Phuket condominium, are constructing residential buildings inland is because land for smaller bungalow developments is getting scare. As well. people who work on the island are as keen to snap up these units as those in Bangkok eager to get a condominium near a mass-transit station.

They can certainly afford to buy them because Phuket remains under any circumstances a very wealthy province.

The full consequences of the May political unrest have yet to be felt, but the demand for residences, offices and industrial properties in Bangkok just refuses to go away

It is still too early to assess the impact of the two months of civil disturbance on all types of property because the market moves far more slowly than the stock market, said James Pitchon, executive director of CB Richard Ellis (CBRE).

Changes are slow even in the rental market because office tenants usually have three-year lease commitments and residential tenants are tied to year-long agreements, while retail tenants tend to hold three- to 25-year leases.

“Frankly it is too early to say what the impact will be on prices, rentals and the level of transaction activity,” he said.

However, it seems that no matter how bad the situation may look, the market does continue to move. Although the company had to move to a temporary office at the Bitec centre on the Bang Na-Trat Highway to continue functioning, CBRE concluded some transactions even in mid-May when the numbers of deaths and injuries were mounting in Bangkok. The transactions were in Bangkok and Hua Hin, and were a mixture of new sales and resales.

“So life goes on, and people are still going to need somewhere to live. They are going to need offices, they are going to need factories and they are going to continue to shop,” said Mr Pitchon.

He said that as far as the residential market is concerned, his earlier concern had been that it seemed to be approaching a level of overheating because a number of projects were sold out in the first quarter.

“Our concern now is over the [lower] demand volume, but we still believe that some of the momentum factors remain the same. For example, the desire to live next to a mass transit station.”

Although some people think projects farther into a soi will gain favour with buyers who see them as safer in light of the arson of buildings on major roads after the red shirt protest was suppressed, Mr Pitchon does not believe the market will turn this way.

“In that case, how are they going to get to work? How many buildings were burned? Come on, it has been exaggerated.

“It’s a bit like saying Londoners would never use mass transit again after the [2007 terrorist] bombings – that didn’t happen.

“I’m convinced people still want to live close to the mass transit system because of the convenience.”

It is expected that the level of speculative buying will decrease but will not die out completely. People will still be looking at property as an income-producing investment as long as interest rates on bank deposits remain low.

Turning to the office market, Mr Pitchon said that the demand has been low since 2006, both because of the domestic political situation and the global financial crisis.

“We were starting to see an economic recovery in the first quarter of 2010, but that has not yet resulted in increased demand. However, there are still people leasing new office premises.”

An emerging bright spot for this market may be when companies start reviewing their business contingency plans in the aftermath of the violence in Bangkok.

“We may see companies that have multiple locations in Bangkok choosing to locate at least one office at a greater distance from the others,” he said. “So who knows what will happen? We may see people putting a greater distance between their facilities. This could benefit locations along the BTS skytrain extension to Soi La Salle, which is expected to be operating in 2011.”

The mass transit system is the key to setting up an office a little further away from the central business district, because from the user’s point of view the physical distance covered by the train is not important. This means business facilities don’t have to be crowded into one area.

The broad picture shows that there is very little new supply coming into the office market. Only one “grade A” office, Sathon Square, will be completed this year and another, Park Venture, next year.

“There are two grade A office buildings under construction, so we will have to wait and see what will happen to demand, but we do not expect to see a significant number of companies closing.”

In the industrial land market, Mr Pitchon said the overall numbers were looking better in the first quarter following a recovery in global demand for manufactured products, but again, this has been influenced by the unrest.

“Manufacturing areas and ports were not affected by the protests, but obviously Thailand’s image has been badly damaged as a destination for investment in manufacturing.”

The hotel market suffered the most immediate impact of the unrest in Bangkok. “Hotels have to sell their rooms every night and obviously we saw the closure of a number of hotels, along with multiple travel advisories from foreign governments.”

Both Bangkok and Phuket saw arrivals improve in the first quarter of the year, with the April figures for Bangkok being similar to 2009, and the figures for Phuket better than in 2009 and 2008.

“I believe that there are many repeat visitors to Thailand who despite the turmoil and bloodshed in May have a loyalty to Thailand as a destination,” said Mr Pitchon.

“The May figures are obviously going to be very poor, but we are also now entering the low season. The big test will be how Thailand performs in the peak season at the end of the year.”

Mr Pitchon added that one of the biggest challenges in the hotel industry continues to be the amount of new room inventory, which was a problem even before the events in April and May. Should the number of tourist and business arrivals drop, this will be a tougher issue to resolve.

However, he added, even in the period immediately after the unrest there were some significant capital transactions. A major example was AIA being selected by the Stock Exchange of Thailand to buy its 9.6-rai site on Ratchadaphisek Road for 1.6 billion baht.

Two other examples were the Seacon Group’s acquisition of the 500,000 square metre Future Park Bang Khae shopping centre for 2.5 billion baht, and the sale of the Ban Taling Ngam Hotel on Koh Samui for 750 million baht.

In this role, Ms. Callum will drive forward the in-house research and consultancy capability for Thailand, specifically focusing on growing the consulting business whilst maintaining current client services and developing new business opportunities.

 
The CBRE Research and CBRE Consulting offering includes market intelligence and analysis, advice for new developments and opportunities, project feasibility studies and general market insight into all sectors of the Bangkok market and the major resort property markets of Phuket , Hua Hin and Koh Samui.

With more than five years experience in research and consultancy, Eilidh has spent the last three years providing regeneration and economic consultancy with CBRE UK and has amassed extensive experience in market studies, feasibility studies, best-use analysis and development consultancy, in the form of reports, presentations and economic and financial analysis.

Mr. James Pitchon, Executive Director at CBRE Thailand, said: “The challenge for developers and investors in Thailand is that there is very little publicly available accurate information about the property market.  The key to providing accurate and up-to-date information is to have access to real-time market transaction data.  CBRE is the most active agency company in Thailand; therefore, we possess a large volume of data that is not available to other companies.  In 2009, CBRE leased 97,128 square metres of offices, sold 568 condominium units in Bangkok, and leased 262 residential units to expatriates.  This gives our research and consultancy team the best market information which means that our clients will be able to benefit from the most accurate information on the market.”

Ms. Callum added that “CBRE’s existing research and consulting business already delivers market-leading services to our biggest clients.  Not only will I bring international experience and lessons of best practice to CBRE Research and CBRE Consulting in Thailand, but I will be able to add the latest research and analysis techniques using CBRE’s unrivalled global standards which will help our clients develop better and more profitable projects.”

BRT Route 1: Chong Nonsi BTS Station to Ratchada-Ratchapreuk Intersection

Source: Bangkok Metropolitan Administration, CBRE Research

Thailand’s standing as a major investment destination is coming under question as its government fails to resolve the country’s bloody political crisis and economic damage mounts.

Bangkok grew calmer Thursday, a day after hard-line protesters set fire to the country’s stock exchange headquarters, a major shopping mall, a TV station, and other locations. Several people died in the clashes Wednesday.

The crisis was already causing severe damage to Thailand’s economy before the latest spasm of violence. But the chaos has added a new dimension, forcing businesses to contemplate more-drastic steps to ensure safety of their employees and causing some foreign investors to wonder if Thailand’s deep social divides can ever be repaired.

Some companies were already considering moving employees to hotels near the airport so they can escape more quickly if street violence spreads, while others are shifting their foreign direct investment, or FDI, to other countries entirely.

“Unless the crisis is resolved, law and order restored and a credible process of reconciliation begun, Thailand will probably lose out in the FDI stakes for a long time,” says Manu Bhaskaran, chief executive of Centennial Asia Advisors, an economic consulting firm in Singapore. Even longtime investors are wondering “should I be engaged at all” in Thailand, says David Fernandez, a managing director at J.P. Morgan in Singapore.

Tüv Süd, a German company that conducts product testing and industrial certification, with operations throughout Asia, was about to make an acquisition of a Thai oil-and-gas-services firm when the protests intervened.

“Because of the instability we are holding off,” says Ishan Palit, chief executive of Tüv Süd’s Asia operation. With his German bosses generally eager to expand in Asia, those resources will now go to places such as Malaysia or Indonesia, he says. “Until two weeks ago, the view was still that it was going to come back and be all right,” he says. But now, “it’s gotten more serious.”

Thailand’s problems are “a bit more fundamental” than the past, adds Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. “It makes it difficult to justify major allocations to Thailand,” he says. “I can find other countries that are more attractive without having to worry about the political situation,” he says, including stock markets such as South Korea and Taiwan.

Thailand’s conflict stems in part from tensions between Thailand’s sizable rural underclass—who make up a majority of voters—and urban elites perceived to control the country’s key economic and political institutions. The protesters are led at least in part by former prime minister Thaksin Shinawatra, a tycoon who cultivated their support through populist policies and easy credit before he was removed in a 2006 coup. He lives in self-imposed exile to avoid imprisonment on a corruption conviction, but supports the movement financially from abroad.

Thailand remains a critical part of the global supply chain and an extremely important place for investors, with 65 million consumers and far better infrastructure for manufacturing than most of its neighbors. It has survived political crises before, including violence in the 1970s and 1990s, and is still on track to post gross domestic product growth of 4% to 5% this year on the back ofstrong consumer spending and demand for exports made far outside the conflict areas. The country could rebound quickly if a resolution is found.

But Thailand was already struggling to fend off less-developed, lower-cost, neighbors such as Cambodia and Vietnam in attracting FDI in recent years. For the past two years, it received less FDI than Vietnam, even though the latter’s economy is far smaller.

The country’s intractable political issues are contributing to the problem. David Simister, chairman of the Thailand unit of real-estate services firm CB Richard Ellis, says demand for office and industrial space from multinationals has been somewhat subdued since 2005, when protests first started rocking the capital in the leadup to the 2006 coup that deposed Mr. Thaksin.

Now the situation has reached a new level of seriousness, he says. “This is unchartered and the level of tension is much higher.” The company has moved its operations from central Bangkok to a suburban office space and set up 100 employees in temporary workstations.

Other companies have been struggling to reroute product shipments and supplies around conflict areas, while some staff are having a hard time getting to work because of the lack of public transportation.

“Virtually everybody is now being touched,” says Paul Quaglia, a director at Bangkok-based security consulting firm PSA Asia. Multinational companies are “are not running for the exits—but they’re starting to look at their maps to see where the exits are,” he says.

Transfer fees will remain reduced from 2% to 0.01% and mortgage registration fees from 1% to 0.01%.

This will reduce costs for the sale of completed property but will have no effect on off plan launches.

The Thai market has historically shown it can weather crises without damage to investors     The protracted political stand-off that has turned parts of Bangkok’s inner city into a barricaded fortress for more than a month is unlikely to lead to dramatic drops in property values, although some people have deferred buying decisions for the time being, says David Simister, chairman of CB Richard Ellis (CBRE).

He added that CBRE sold 12 condominium units in the third week of April, although he doesn’t expect that momentum to continue in the short term unless a political resolution is clearly seen.

“The condominium sales recorded were nine in Bangkok, one in Nonthaburi and two in Hua Hin. The buyers were all Thai and I don’t think that the properties they bought or the property market in general is in any way suddenly going to show dramatic drops in value,” he said.

“The reason I say that is because the property market has been dampened by political uncertainty for the last five years.”

Those who have plotted the pattern of property values during periods of political uncertainty in this country, as CBRE has done in the 21 years it has been in Thailand, would notice that prices rise in good times but hold and do not drop in bad times, with steady growth again after the situation improves.

Although real estate prices did drop dramatically during the 1997-98 Asian economic crisis, Mr Simister explained that these plunges took place among secondary grade properties and not prime ones, whose values held up.

But even if and when political reconciliation begins, Mr Simister said questions would remain about Thailand’s relations with international investment, and particularly tourism.

“The danger is that if we keep having repeats of crises like the red and yellow demonstrations and the disrupted Asean summit [in 2009] Thailand won’t bounce back as quickly as after previous crises.”

With key streets of the inner city having been turned into barricaded red shirt zones, companies affected by commuting problems have shifted to temporary offices.

“We have been quite active in finding people temporary office accommodation as they needed alternative space because of access problems. But the nature of the move is very short term – the situation in no way is changing the pattern of purchasing or the pattern of value in Bangkok, and again one can only see this as being a short-term aberration not a new norm.

“What we have seen is the majority of Bangkokians are doing their best to work around the pockets of demonstrations.”

Mr Simister added that the shift by some companies has only been in terms of taking a serviced office desk for a few days and not cancellation of a lease in a city centre office tower, which could lead to consideration of a major relocation, to areas such as Bang Na or northern Bangkok.

“The impact, in our opinion, will be short-lived,” he said.

While dispelling the impression that foreigners are no longer buying property in Bangkok, Mr Simister admitted that the pace has slowed down.

“In Bangkok there was a period between 2002 and 2005 when foreigners were very active in the market, and those foreigners were both end-users and people buying into a rising market for speculative gain.

“And condominiums selling at that time in the upper market were typically 49%. Our database shows that foreign purchasing has dropped to approximately 30% of the market. People who still want to live in Thailand are buying, but people who are focusing on speculative gain are looking at markets such as Hong Kong and Singapore.”

However, it seems Thais are more resilient to the drawn-out political turbulence and remain confident of the long-term outlook. Mr Simister said his agency has seen land sales in city-centre areas achieving new benchmark prices in recent months.

“So all in all we are still seeing substantial confidence in the Thai property market.”

Turning to the resort markets, he said there was no evidence of a drop in value in Phuket and Samui as existing foreign owners of property on the two islands are choosing to hold on to their assets.

“I think the fundamentals of the resort markets are that they are discretionary purchases with surplus funds; purchases are 100% cash,” he said.

“Again looking at Phuket, most of the buyers are sitting on positive financial gains on their investment – there is no direct pressure to sell and generally people only sell when they have made substantial profit. This means there is generally little stock on the market at any one time.”

In fact, it has been the global financial crisis that has had the prime influence on the resort markets and this has led to the cancellation of many developments. While big Thai companies have launched major projects in Phuket in recent years, quite a lot of the developments on both islands have been foreign-led, although some of these projects have been quite small.

“From our experience we have seen a reduced volume of sales but prices are still recording substantial gains for those few sellers in the market.”

Despite all the problems, Mr Simister said Thailand is still a top resort destination and although he has seen good prospects in emerging markets such as Cambodia, there is no stock of quality resort properties there today.

“We have brought small projects onto the market and they have sold out very quickly at significantly cheaper prices, but we are talking about very, very small volumes.”

CBRE will be operating a reduced office hours from Monday to Friday at 9 a.m. to 4 p.m.  Despite the reduced office hours, CBRE staff are making sure they can be contacted by clients via mobile phones and our widely visited website www.cbre.co.th. Alternatively, our temporary office telephone lines are 02 749 3977 and 02 749 3988. Any changes to the situation or the telephone numbers will be updated on our website.

We do not anticipate normal activities for sales and leasing services. However, our team will be available to maintain contact with our clients and customers and deliver the best possible services given the current circumstances.

One of our main concerns has been our property management portfolio, whilst the majority of tenants and residents have decided to move out of the affected area. We are still providing technical services and endeavouring to keep occupants informed and safe.

Our smooth and efficient office relocation process has been greatly assisted by Dr. Prasarn Bhiraj Buri, President & CEO of BITEC.

“We are trying our best to operate as normally as possible under the present conditions” said Ms. Aliwassa Pathnadabutr, Managing Director, CB Richard Ellis Thailand.

Thailand’s political crisis has dominated news headlines for the past month and it is undeniably a pressing issue that businesses cannot ignore. The prolonged protests and crisis have had effects far beyond the tourism and hotel industries, with impacts on other sectors of the property market from residential, offices, retail to industrial.

Thailand’s latest political setback raises concerns over the country’s stability, particularly in the view of foreign investors. In the past 30 years of Thailand’s political history, the country has undergone nearly 10 military coups, none of which has created a division as widespread as today. Previously, political considerations had little impact on business and investment decisions, but today this has become a major consideration for both local and foreign investors.

In the current climate, investors’ confidence is a key issue that will undermine the recovery of the local property market. Since the end of last year, there have been clearer signs of the global economic recovery and Thailand’s residential market has been on the right track for recovery, with demand mainly driven by local buyers. The tax incentives that have been in place for the past two years have also been a big stimulus.

A new development cycle just started at the beginning of this year. The existing supply of condominiums in Bangkok is being absorbed and a new breed of project launches has begun marking the beginning of the boom cycle. Many publicly listed developers have launched schemes that have been successful, many selling out within a day or two. Foreign buyers are also returning to the market as their domestic property markets recover. Thailand is an attractive choice as properties remain undervalued with room for further price growth, offering a very good buying opportunity for investors as well as for the market to realise its full potential in terms of sales volume and capital appreciation.

However, the onset of the new round of protests has affected market sentiment. We have already seen a number of project launches and marketing events being postponed in the past two weeks with the ongoing protests, and sales activities slowing down. Property price increments have been suppressed by the ongoing crisis and foreign buyers are slowing down and holding off purchase decisions.

Looking back to the peak of the global economic crisis, when most economies were greatly affected, Thailand has in fact been less impacted by this crisis as the market has developed stronger market fundamentals in the property, banking, industrial and tourism sectors, learning grom the mistakes made in the previous Asian crisis. The country’s economy is much better positioned to move forward, were it not for the current political deadlock. One can only hope that the crisis will end amicably and stability will return, allowing the country to seize growth opportunities. If not, the crisis will set the country back years behind other markets.