THAILAND CONDO SITUATION JUNE 2008

source: Raimon Land/Bkk Post June 16 2008

The tourism industry continues as the main driver behind interest in Thailand's resort condominiums, with holiday destinations close to Bangkok receiving the most attention, especially from international buyers lured by attractive prices. Thailand's seaside resorts; namely, Pattaya, Phuket, Koh Samui and Hua Hin, where more than 30% of the country's luxury condominium inventory is now located, have experienced 9.5% annual growth in international arrivals since 2003, and these strong figures are supporting resort property expansion.
A surge in condominium launches during the second half of 2007 reversed a slowdown that began in mid-2006 and propelled the year-end tally to 2,415 new units. Of these, 67% were located in Pattaya, 26% in Hua Hin, 4% in Phuket and 3% on Koh Samui. Pattaya's strong performance was boosted by impressive economic expansion along the eastern seaboard and its proximity to Bangkok and the new Suvarnabhumi Airport. Luxury condominium launches in Pattaya are trending towards both inland projects with sea views and those with beachfront locations, a reflection of buyers seeking affordable properties regardless of whether or not they have direct beachfront access.

Located three hours southwest of Bangkok, Hua Hin remains attractive due to its relaxing atmosphere, more affordable prices, appeal to Thai buyers and faster development completion schedules. Hua Hin sprang back to life in 2007, with the introduction of 640 units from prominent Bangkok developers, many of whom are launching new projects this year. Lacklustre demand in Phuket and Koh Samui was linked to hesitant developers baulking at external factors such as currency exchange rates and possible amendments in the Foreign Business Act to make residential property rights more restrictive for non-Thais. Should the government's policies on foreign ownership change to allow a higher percentage of foreign ownership, developers will likely introduce more projects in Phuket and Koh Samui to satisfy international demand. In spite of the deceleration in the rate of new resort development launches in 2007, combined sales value leaped 12% year-on-year to 17 billion baht on the take-up of 1,789 condominium units. Pattaya's luxury condominiums sold 544 units worth 6.6 billion baht in 2007, compared to 1,609 launched, for an average of 12.3 million baht.

Hua Hin captured 6.3 billion baht on the sales of 979 units, averaging 6.4 million baht. These projects received strong interest from local investors leading to a majority of the 640 newly launched units being sold.

Limited supply on Koh Samui led to low sales last year, with only 52 units selling for an average of 15.6 million baht. The purchase of 214 units in Phuket generated 3.2 billion baht for an average price of 14.8 million baht.

The average price per square metre (psm) in Pattaya climbed 10% over 2006 to 96,332 baht psm, the highest among all resort areas, followed closely by Phuket at 95,181 baht. Samui units averaged 87,420 baht while those in Hua Hin jumped 14.6% to 72,063 baht. Of the total resort condo sales in 2007, 27% of the units sold were priced over 100,000 baht psm, and 21% between 80,000 and 100,000 baht psm. Units in the 60,000 to 80,000 baht psm range commanded 29% while those under 60,000 baht made up 23% of the total.

It should be noted that very few of the beachfront or seaview developments are now priced under 100,000 baht psm, and sales at the top 10 most exclusive projects averaged 123,715 baht in 2007. Of all developments launched since 2003, 1,814 units or 23% were completed as of December last year. Of the remaining 6,177 units, 3,632 were still under construction and 2,545 units were in the planning stages. These figures demonstrate that there is still very little supply in completed condominiums, as well as a limited number of completed projects in Thailand's resort locations. This situation has lifted resale prices, allowing developers to increase the prices of units in new projects while opening the door for investors seeking impressive short-term capital gains.
Foreign buyers accounted a significant portion of condominium purchases in Thailand's resort areas in 2007, though the most active markets have changed.
Russians rose from outside the Top 10 to head Raimon Land's 2007 buyer chart, followed by Thais, British and Australians. Germany and China also moved higher while the US and Swedish markets started to slide.

Russians, Thais and British lead Pattaya's property market, and Phuket is commanded by Russians, British and Australians. Hua Hin remains a predominantly Thai destination, with emerging international interest now making up 20-30% of acquisitions. In 2008, look for more players and new groups of buyers in Pattaya, with limited completed stock driving up prices. Hua Hin will continue to exhibit strong local demand, with prices increasing in both resale and off-plan projects. Phuket and Samui will remain vulnerable to external factors. New supply in Phuket will push demand, and look for new areas on the mainland adjacent to the island, now being referred to as Greater Phuket, to open up. Koh Samui will remain a niche market leaning toward branded real estate.
This is the fourth and final article based on research by Raimon Land in 'Condominium Focus Thailand: Update of Inner-city Bangkok and Key Resort Areas'. Nigel Cornick is Chief Executive Officer of Raimon Land Plc.

Prime Nature grows in Hua Hin market
source: Bkk Post June 16 2008

Condos, villas aimed at Thais and expats

HUA HIN : Prime Nature Group Co Ltd plans to develop a low-rise condominium and 23 pool villas worth a combined 800 million baht to tap strong demand in Hua Hin, according to chairwoman Sunattee Nerngchamnong.
She said the Hua Hin resort market had changed from drawing mainly Thais to more foreigners from Europe who are now investing in, developing and buying property, largely on hillsides. "Some foreign investors have developed residential projects and sold or rented out units to their nationals during their winter season," she said.

"Though the political situation is a concern among Thais, higher inflation rates will make the property market more attractive for investment." Prime Nature will begin development of two six-storey buildings for a condominium project worth 500 million baht on the site of its Prime Nature Villa Hua Hin in a few months. Construction would be completed by the end of the year and units would be transferred in April next year. The project will have 72 fully-furnished units sized from 100 to 250 square metres and priced from seven million to 25 million baht or 70,000 to 110,000 baht per square metre. Half of the units are sold and they expect to be sold out by year-end. The company will also develop 23 pool villas worth 300 million baht by the end of the year and sell them on a timeshare basis at unit prices ranging between 10 million and 30 million baht. Each investor has ownership rights for a 30-day vacation and obtain an annual yield of 8% to 13.62%. A third of the units have been sold, all to Thais. In Prime Nature Villa Hua Hin where the company has 100 rai, 30 rai would be developed for eight villas on lots of 200 to 400 square wah with prices between 25 million and 85 million baht. The company also owns the Prime Nature Villa single-housing project covering 300 rai in the Onnuj area of eastern Bangkok. It plans a joint venture with a Thai contractor to develop a seven-rai plot for 12 units with a total investment of 250 million baht.

"We're studying the services sought by Japanese as all units will be rented out to medium- to top-executive Japanese expatriates working for industrial estates along the Eastern Seaboard," Mrs Sunattee said.
The majority share in the new project to be set up in the third quarter will be held by the company, as it wants to maintain the concept and manage sales and marketing. To date, 30 plots of 100 square wah each have been allocated for sale at 70,000 baht per square wah.

Developer sees globalisation of housing market continuing
source: Bkk Post June 16 2008

The property market is becoming increasingly globalised with people buying houses and condominiums across borders on the back of rising affluence, says Dennis Chiu, managing director of the 250-rai Hyde Park Vibhavadee housing estate and Harrow International School. Design, environment and standard of development are the key considerations for international buyers, said Mr Chiu, who came to Thailand from Hong Kong 10 years ago to launch the school and also has businesses in Singapore, Malaysia and Australia.

''I find that in places such as Hong Kong, which is a highly urbanised city, people like to collect houses, let's say in Shanghai [or] Singapore. They like to invest in properties on an international basis, it's appealing to them, but I think what is more important is that you must have the right product regardless of whether it's in Kuala Lumpur, Bangkok, Singapore or London.'' While Hong Kong Chinese like buying condominiums for proximity to the city centre, they still consider houses to be real trophies because of the difficulty in finding good sites at home. ''Most of them understand that in the long run a house has much higher potential as capital investment.'' With the ability to earn more money than people in many other Asian economies, Hong Kong residents consider anything around US$500,000, or approximately 16.5 million baht, to be very affordable. A good house in Hong Kong would cost around 100 million baht compared to 15 million baht in Thailand.

''Thailand's appeal to Hong Kong people is that the price is very low, and if they believe the same trend will occur in Thailand as the rest of Asia then the price will go up,'' said Mr Chiu. The Hyde Park estate, which boasts a 100-rai lake, offers houses priced from 13 to 50 million baht. Some of the 76 houses built in the first phase command 70 million. While Mr Chiu has a good regional perspective, so far most of the marketing has been done within Thailand, though the company does intend to sell overseas. Expatriates in Thailand have also been buyers. Hyde Park boasts a 100-rai lake with houses priced in a range from 13-50 million baht. ''We were pleasantly surprised to get a lot of buyers from abroad,'' he said. Mr Chiu, who is also managing director of Far East Holdings International Ltd in Hong Kong, believes property prices will always outpace cash holdings but the key is whether one is going to be able to buy something that one likes. He sees this as a bigger issue than timing a purchase since housing is a long-term investment.

''Too much speculative element is not always good for long-term investment, and I think buying a house is a long-term investment and if you believe that the value will increase, it will improve over time, then I think buying a property today is good.'' With the rapid urbanisation across Asia propelling real estate prices upward, Mr Chiu believes buying property is ''a no-brainer'' for the investor. ''I think the real point is don't overdo it. You must know what you want to buy and buy the right thing. A lot of people discuss timing to buy, but timing a purchase is more for business.'' While the US credit crunch is having a worldwide effect, Mr Chiu observed that in high-growth Asian economies, inflation is the main worry.

However, inflation can sometimes be a boon because if he had to build Hyde Park again today it may cost him double the price. ''I think inflation is good for me because the price has gone wild. This will be a good hedge against inflation. In fact, I am worried about my next phase because the cost is going to be much higher. That's becoming the norm in Asia; anywhere you go if you ask anybody in business, the cost push is real.''

Mr Chiu urges the Thai government to relax regulations governing foreign purchases of property because of the international direction of the market. He noted that international buyers are only keen on certain types of real estate and what really appeals to them is a very small percentage of the land bank of any country or city. ''Since I am a property developer, obviously I see that if the government can relax the rules on ownership it will widen the appeal of the whole city or the whole country to the foreigners,'' he said. ''You will have a bigger mix of people coming in and to me that has got to be good and I think even on the social side it's not a bad thing for the country.''

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