THAILAND CONDO SITUATION 2008

Campaigns already promise attractive deals for investors, and energy-efficient houses seem to take centre stage

Property firms are preparing for another year of intense competition and are planning marketing campaigns to promote their residential projects in hopes of achieving 15-20-per-cent sales growth this year.

Major property developers are working on a wide variety of plans to capture their share of the Bt200-billion property market this year. Colourful marketing campaigns are being devised, with each developer setting a target of 15-20-per-cent growth this year.

From houses designed to save energy and protect the environment to advice that investing in houses gives a better return than keeping money in a bank, developers are preparing to maintain the intense competition that coloured the final months of 2007.

Last year's sluggish economy forced all property firms into heavy marketing activities and big promotional campaigns that reached a peak in the final quarter. With all firms expecting 15-20-per-cent sales growth this year and some having also set targets for next year, there is no end in sight to the cut-throat competition.

The market has now moved firmly beyond the notion that consumers want houses in which to live. Both low- and high-rise projects these days are seeking buyers who want residences as investments, and developers are offering after-sales service that includes finding tenants to rent the properties of new buyers.

The strategy is seen as creating added value to accelerate the performance of property firms, and developers using it successfully include LPN, Asian Property, Plus Property and Preuksa Real Estate. Some have established separate business units - called resell units - to help customers find tenants to rent houses. In some cases, the resell unit begins work at an even earlier stage.

Preuksa Real Estate deputy managing director Prasert Taedullayasatit says the unit can help customers sell their existing homes if they want to buy in one of Preuksa's housing projects. Apart from increasing convenience to customers, it also supports the company's business and represents a major revenue channel.

"We have more products now, particularly condominiums. Therefore, we need to have a tool to support the business. The resell unit will be a major support tool. Today, they're just a department [of the company], but in the future they may transform into a new company," Prasert says.

Many property developers have also focused on websites, which have proven to be an effective marketing channel.

The developers are able to display their model homes, the land, locations and many other potential attractions before customers visit the physical site. Websites are also cheaper than leaflets, brochures or direct mail and can reach precise target groups.

Suparat Veerakul, vice president for corporate communications at Land and Houses, says his company's website also provides information on consumer demand and allows it to customise houses for specific clients.

"We use integrated marketing tools, but next year we plan to focus more on marketing through websites. Although we allocate only Bt7 million for the websites, they can reach exact targets. We've already seen good consumption trends from this marketing channel," he said.

The proportion of Land and Houses' sales made through websites was 10 per cent last year. Already, this figure has risen to 20 per cent and the company expects the proportion to reach 25-30 per cent this year.

With limited consumer purchasing power, marketers feel they must launch products this year with campaigns that make consumers feel comfortable about buying and that it is worthwhile paying for a residence instead of leaving their money in the bank.

Sena Development was the first developer to initiate this kind of campaign, by joining with the Government Housing Bank (GHB). The campaign features new investment alternatives for customers who are hesitating about buying houses out of insecurity arising from economic uncertainty and an unclear political situation.

All houses selling under the campaign are sold at initial prices for ready-to-transfer homes. The bank is asked to extend by two years the period over which customers will be paying instalments. For example, if the contract is for 20 years, customers buying under this campaign will be able to pay instalments over 22 years. However, the interest calculation begins in the third year, so customers pay total interest applying to a loan over 20 years. For the first two years, the customers need not pay instalments to the bank.

Customers with a good credit history can also save the first two years' instalments with the bank, so that they can access a big chunk of money with which to reduce the principal of the original mortgage. For example, if they save Bt10,000 over the first two years, they can borrow Bt240,000, which can be used to reduce the principal sum of the mortgage, resulting in much lower repayments in the third year and thereafter.

Another alternative begins with offering customers two years' ownership of a new house without any payments. Customers may accept this deal on its own or also lease the house, collecting rental fees to enhance their ability to reduce their bank loan.

The campaign, which applies to Sena Development's six housing projects, is still available. There are two projects left with a total of 50 units, including single-detached houses for between Bt2.6 million and Bt5.4 million; Sena Grand Home Rangsit, with homes from Bt2.6 million to Bt6.4 million; Sena Villa Ram-Indra, priced at Bt2.7 million to Bt4 million; and Ruamfan townhouses for Bt1 million to Bt3 million.

Tararom Enterprises is conducting another campaign featuring purchases for investment at its 40-unit Parkway Place project on Ramkhamhaeng Road. The project's "double-front shophouses" allow customers to separate a rental area from the residence. Each house is priced at Bt4.6 million. After a down payment is made, contracts are signed and the property transferred. The Bt3.2-million loan with interest at 8 per cent over 20 years requires monthly instalments of Bt27,000 to the bank. With an ability to rent half the property for about Bt15,000 to Bt20,000 a month, customers can use the rental fees to cover up to 70 per cent of their instalments.

New houses designed with an "environmental preservation" concept are another attractive choice, because they tap into the hot social issue of global warming. Property developers are now joining environmental organisations to build awareness of the problem.

The Energy Ministry said 25 per cent of all energy consumed in Thailand last year was used by businesses and residences. This sector was third in energy use, behind the transport and industrial sectors. Property developers themselves are tending to consume more and more energy, with customers inevitably shouldering increased costs, both directly and indirectly.

To ease the problem in long run, the ministry's Alternative Energy Development and Efficiency Department has organised a competition for energy-efficient houses. It began in 2005 with a campaign for all housing developers to apply thermal considerations to designs. Up to now, more than 90 housing designs have been entered in the competition, and developers are seeing it as an opportunity to promote themselves should they win.

"Property Perfect will use environmental and energy-preservation issues to build awareness," said Property Perfect deputy managing director Teerachon Manomaiphibul. "We will have to arrange big events."

As well, all developers are expected to incorporate environmental and energy-saving considerations in their marketing and brand-building strategies this year.

Supalai president Prateep Tangmatitham believes all developers should join together in the interests of preserving the environment and that the ministry's competition should be expanded to include high-rises, such as office buildings and condominiums.

French development-assistance agency Agence Francaise de Developpement (AFD) has shown its willingness to fund housing loans totalling Bt2 billion with low interest over 15 years for consumers borrowing to buy energy-saving houses. It has discussed the issue with the GHB and three representatives from the property sector.

The discussion followed the signing of a memorandum of understanding between the Neighbouring Countries Economic Development Cooperation Agency and the AFD.

GHB president Khan Prachuabmoh says the bank plans to consider other solutions to support consumers wanting energy-efficient houses. It could separate its own budget for housing loans or combine it with the AFD's financial support to expand the sum available for loans. It will also work with developers in using materials for constructing environmentally friendly houses and ask scholars from Chulalongkorn University to help by studying the details.

"It's a big issue," Khan says. "We must help in the campaigning. Construction costs may increase 5-10 per cent, but if we can then save up to 30 per cent in energy costs, I think it's worthwhile."

Thai Condominium Association director Athip Peechanont agrees with the bank's plan to offer low-interest loans as the basis for a campaign on the energy-efficiency issue. If the plan becomes reality, developers will have to set aside part of each new project for energy-efficient residences that comply with its requirements.

Property reporters The Nation

Condo complex faces licensing fiasco
source: The Nation March 4, 2008

Project in trouble after Chatuchak district office chief files police complaint over alleged illegal construction A luxury condominium complex in Bangkok's Chatuchak district has allegedly not gained construction approval for one of its two buildings, prompting the district office director to file a police complaint for construction without permission.
Chatuchak district director Pornlert Phanwattana said yesterday that the project - named The Pulse by developer Prinsiri Plc - existed before he took up the post.
He was informed by the Bangkok Metropolitan Administration (BMA) Public Works Department after he joined the office that the developer did not apply for construction permission for one building. Pornlert lodged the complaint at Paholyothin Police Station. All sides must now wait for the police to summon them to give information for the investigation, he said. He added that officials had been trying to stop the condominium construction but had failed to do so. However, Chaiwat Kovitchindachai, deputy managing director of Prinsiri, insisted his company had abided by the law. "We applied for the construction licence under Article 39 (2) of the Building Control Act. We have filed the application and the approval is pending. If the construction plan is to be amended, we can re-file the application [until we meet the criteria]," he said.

Under the article, implemented in 1996, developers can start construction work after submitting an application ratified by its engineers. The developer will then be issued with the construction licence after their plans meet the construction and environment criteria.

The rule was initiated after developers' complaints of slow approval of licences from the BMA. The condominium, which has some 300 units in two buildings located in Phaholyothin Soi 37, is nearly complete, with Building A to be opened in May and Building B in August, a BMA source said. Prinsiri, a well-known property developer, opened an office for purchase reservations late last year, with a starting price of Bt2.55 million per unit. It was now 80 per cent sold, the source said. However, while one building had obtained construction permission, the other had not, the source said. A Prinsiri executive said the company had no intention of violating the law and was fixing "what could be regarded as illegal".
The source said the firm would maintain its good reputation. This issue emerged after the firm applied for permission at an environmental agency after the construction was almost complete, but the agency refused to issue approval as the firm failed to present the needed construction permission, the source said. Bangkok Governor Apirak Kosayodhin said he had not been informed about this case but would order a probe to see if there was any violation and who was involved. He said the agencies responsible were the BMA Public Works Department, the City Planning Department and the district office.
Another BMA source said it was impossible that district officials would not know about this and that they could not just deny responsibility regarding this project in their jurisdiction. A sign in front of the site showed that another firm was constructing the condominium. The sign showed the construction permission registration number, which was reportedly for only one of its two buildings.

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