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Tuesday, 04 September 2007 |
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The sub-prime meltdown in the US will ultimately
affect the cost of borrowing and the ability to do so in Thailand because a lot
of funds that flow into this market come from institutions in US and some of
them have been affected, says Nigel Cornick, the CEO of Raimon Land Plc.
Financial institutions' general risk awareness increases when there is talk of
mortgage defaults, repossession and price slumps, ''so those things tend to
spread even though [the real impact] may be confined to America'', he says.
The problem in the US is rooted in the willingness of lenders to finance
property up to 100%, and second mortgages are commonplace. Many homeowners are
leveraged far beyond their ability.
''Now [sub-prime lending] is a market that is to some extent unique to America,
so when you get a hiccup _ and it happens very quickly _ people's equity gets
wiped out overnight, leading to less inclination to pay back your debt because
you know your real estate asset is worth less than what you borrowed.''
The key lesson that Thais can learn from the sub-prime crisis, he says, is to
keep within realistic debt-to-equity and loan-to-value ratios.
Despite the global sub-prime jitters Raimon Land continues to be optimistic
about the future of the Thai property market. It is gearing up for the launch
its posh twin-tower The River condominium, opposite the Shangri-La Hotel, in
October; a soft launch took place earlier this year. The show units are nearly
ready and the company will also be launching its own boat shortly to ferry
people to the site. Piling is to start this month and is expected to last six
months before the main contractors move onto the site.
Raimon Land is also working on another exciting project, 185 Ratchadamri, which
is where the Cambodian embassy used to be located.
''We are going through a very detailed design development exercise to try to
customise the number of units to the identified customer base that we have built
up as a result of direct contact,'' Mr Cornick explains. ''So we envisage that
there will be 180 to 200 units _ larger rather than smaller units _ I doubt if
there will be any units smaller than about 120 to 130 square metres.''
However, the company is not in a hurry to unveil 185 Ratchadamri with the timing
roughly around early next year for now. The price is expected
to start as high as 200,000 baht a square metre.
''Where we finish we don't know.''
Mr Cornick advises people not to be put off by the prices of luxury condominiums
in Bangkok because he expects them to double if not quadruple over the next five
to 10 years. Underscoring this is the price of Somkid Gardens, which during the
1997 financial shake-up was around 100,000 baht a square metre but today, if
there is a unit for sale, it would be at least 140,000 to 170,000 baht a square
metre. Even this is only 70%, and most people expecting the price of their
property to double over a decade.
''That would be most people's expectation in a normal market, in markets such as
the UK it has probably quadrupled, but in this market the prices currently being
achieved are not high, historically or regionally, and they can only go up.''
Those who think that coughing up 12 million baht to buy a condominium here in
Thailand a huge investment should note that there are not many places in Europe
where one can buy much with this sum of money. ''There may be in some of the
eastern (European) states but I think in any major city in the world 12 million
baht will not buy you much.''
But given recent worries as well as months of political drift, Raimon Land has
seen evidence of consumer wariness in the number of sales it has made since the
beginning of the year. Despite this the company has sold six billion baht worth
of real estate so far this year with 70% of it bought by foreigners.
The company's foreign buyer base is spread quite widely now with its top buyers
coming from the UK, US, Europe and Australia. ''Interestingly we are seeing a
number of Russian buyers now, particularly in Pattaya but also Phuket and in
Bangkok on the river, so that is going to grow,'' says Mr Cornick.
Raimon Land also expects more investment to flow to the Thai property market
from the Middle East, not just at the institutional level _ Raimon itself has
new investors in IFA Hotels & Resorts from Kuwait and Istithmar Hotels from the
UAE _ but also by individuals.
''There are something like a million people coming to Bangkok for health care
and other reasons out of the Middle East now, which is a significant number of
people,'' he says. ''They all have money in their pockets, and a lot of it will
be converted into buying real estate, I am sure.''
Given the high foreign interest, Mr Cornick has urged the authorities to
consider increasing the percentage of
foreign ownership in condominiums from the current 49% limit. ''That is
one we have always recognised as being an easy option but one they haven't taken
yet.''
Second, he says, the authorities could ease some
of the controls they seek to put on foreign ownership of Thai companies. Third,
they could consider allowing foreigners to borrow money locally to buy
condominiums.
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Tuesday, 04 September 2007 |
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The property developer Chaiyos Land Development Co Ltd
tomorrow will open Fraser Suites Sukhumvit, a serviced apartment worth one
billion baht, said managing director Rohit Sachdev.
He said the company targeted to break even within eight years at expected
occupancy rates of 65%, 80-85% and 90% respectively in the first three years
while the internal rate of return was targeted at between 10% and 11% per year.
''Thailand's tourism industry remains strong, as it is one of the best tourist
destinations in the world. With a clearer political situation, business outlook
in the country will resume,'' he said.
Fraser Suites Sukhumvit is located on Soi Sukhumvit 11, comprising 118 rooms at
rates between 4,500 and 10,500 baht per night or 90,000 to 240,000 baht monthly
for sizes ranging between 52 and 160 square metres.
It is the third apartment managed by the Singapore-based serviced residence
management firm Frasers Hospitality, following the 129-room Fraser Place Urbana
Langsuan and the 142-room Fraser Suites Sathorn. The three serviced apartments
have a combined value of about four to five billion baht.
Chaiyos Land also has some plots of land in the Sukhumvit area, on Suksawad Road
and in Lop Buri province. It plans to develop new serviced apartments on a one-rai
site near its Sukhumvit project over the next two years.
Set up in 2004, Chaiyos has registered capital of 400 million baht, with Fraser
Suites Sukhumvit as its first project, said Mr Sachdev, who is the third
generation of the Sachdev family.
The company is a subsidiary of the 50-year-old holding firm MR Amarnath Group, a
family-owned business that operates trading, textile, chemical, hospitality and
property businesses.
source: Bkk Post |
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Tuesday, 28 August 2007 |
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The rapid change that Bangkok is undergoing with train lines spreading in many directions might confuse property buyers, but to play it safe it is still best to be located in or close to the heart of the city because this does not change for generations, according to Pritpal Singh Gill, the country manager of Pacific Star International (Thailand) Ltd.
The heart of Bangkok is defined by a handful of streets _ Ratchadamri, Wireless, Chitlom, Sathon and parts of Sukhumvit _ and these have remained the prime area for several decades.
''You see, the heart remains the heart and your heart is as big as it can possibly be _ you can't extend your heart,'' says Mr Gill.
With prices of well-located condominiums being so high, not everyone can afford to buy them and if that is so, Mr Gill's advice is to stay as close to the centre as possible, because as skytrain and subway routes multiply and expand it will lead to prices of outlying developments equalising. The difference of a few train stops will become less relevant.
''Eventually it will balance out unless the neighbourhood becomes shoddy.''
Given its attractive location between the Australian and Malaysian embassies, Sathorn Gardens is quoting quite competitive prices starting around 87,000 baht per square metre for the extensively upgraded condominium units in the 20-year-old building.
So far Bangkok has been lucky in that crime-ridden neighbourhoods have not developed in the way they have in many large cities. In such areas, land values tend to plummet and property owners find it very difficult to sell.
Areas identified by Mr Gill as having the potential of benefiting from the spinoff of real estate values in the city centre include stretches further down Sukhumvit toward Soi 105 although he warned that this will take some time because there is still absorption left in the main Sukhumvit strip.
He is also bullish on Narathiwat Ratchanakarin Road, a broad avenue and close to the business district. Also showing promise is a kilometre-long stretch across the bridge in Thon Buri which is now commonly referred to as ''the New Sathon''.
Aside from the Skytrain reaching there soon, it has an attractive profile.
But it is only the area close to the first train station that will likely rise in value and Mr Gill is uncertain whether the escalation will spread to next station.
''Remember, on that side [of the river] there are some fine hotels, it will be quite good.''
However even in prime areas some parts are better than others. Mr Gill notes that prices of condos are steeper in Thong Lo than they are in Sukhumvit Soi 39 and similarly, Sukhumvit 24 is better developed than Soi 11, due to a feeling of exclusivity.
The emphasis on the safety of investing in the city centre is not just empty talk. Pacific Star International is putting its money down in the very centre of Bangkok by launching the Sathorn Gardens condominium. This is ensconced in the posh part of Sathon between the Australian and Malaysian embassies and while it is a 20-year-old building, the company is investing heavily in upgrading the 350 out of the 560 units it acquired as well as the common areas to bring them up to grade A standard.
Prices start at 87,000 baht a square metre which is cheaper than new developments close by such as The Met which is selling at 140,000, and the Sukhothai Hotel's condominium that is expected to reach as high as 200,000 baht.
There are 40-square-metre studios and two-bedroom units averaging 90 sq m, increasing to 200 sq m for three- to four-bedroom apartments.
Pacific Star also has eight penthouses in Sathorn Garden but is not releasing this scarce commodity just yet. ''There was an opportunity because we were able to acquire these units at a reasonable price so we are able to offer them again at a reasonable price,'' Mr Gill said.
Pacific Star has also acquired the incomplete RS Tower in Thong Lo and will announce its plans for this shortly.
''We are looking at other deals in town that are in discussion, we are also looking at resorts, always with partners, but it has not been our focus, our focus has been downtown Bangkok because we think that Bangkok is truly a global city.''
While agreeing that Thais generally prefer buying brand-new property, Mr Gill pointed out that there is a secondary market here and that people must understand that investment and resale value will only hold for developments in good locations with other key factors being amenities, the management and the unit itself.
''So you could have a new development but the value proposition could be poor,'' he said.
Although some property experts have said that foreign investment in this sector has dropped off, Mr Gill noted that this is mainly at the big investment level with the average consumer demand remaining very high.
Even his fellow Singaporeans continue to be keen on buying property in Thailand, having been reassured by Council for National Security chairman Gen Sonthi Boonyaratkalin in an interview that the highly controversial Shin-Temasek deal was a purely business one.
Gen Sonthi was in Singapore again two weeks ago to do more damage control for earlier more inflammatory statements and his message appeared to have gone over well in the Singaporean press.
source: Bkk Post |
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Thursday, 23 August 2007 |
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The listed developer Sansiri Plc has launched sales of
the 600-million-baht Siri on 8 condominium in Sukhumvit Soi 8 to offer premium
units for high-end customers.
The eight-storey building, situated on a 418-square-wah plot about 300 metres
from the Nana BTS station, would house 74 condominium units sized between 55 and
81 square metres with prices starting from 4.9 million baht.
President Srettha Thavisin said the company expected to close sales of the
project in a few days as it already had bookings for 80% of the units. He
attributed the good response to the fact that competition was limited in the
high-end segment and the development itself matched buyers' demands.
At a time of low interest rates, he said, some high-end customers want to invest
in high-potential projects for the long term as they can resell units for good
gains or rent them out to executives or expatriates.
Earlier this year, Sansiri was successful in closing sales of its Siri at
Sukhumvit high rise in the Thong Lo area. It closed sales of the 460 units worth
3.1 billion baht, or an average price of 106,000
baht per square metre, within one month.
Mr Srettha said Sansiri would focus on premium projects while its subsidiary,
Plus Property would focus on middle-end projects.
source: Bkk Post |
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Thursday, 23 August 2007 |
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The luxury home developer Quality Houses Plc plans five new projects worth
7.7 billion baht this year and another 13 worth a combined 21 billion baht next
year, according to chief executive officer Rutt Phanijphand.
The company has already launched two townhouse projects: the 450-million-baht
Casa City Nuanchan with 112 units and the 480-million-baht Casa City
Ramkhamhaeng with 111 townhouses.
Also in the pipeline this year are two detached-house estates: Prukpirom Regent
Ratchaphruk-Sathorn with 106 units and worth 3.2 billion baht, and Laddarom
Ratchaphruk-Pin Klao with 210 units and a value of 2.1 billion baht. As well, it
will build 175 townhouses at the 1.5-billion-baht Casa Ville Grand Ekamai-Rarm
Intra development.
Mr Rutt said QH expected 10 billion baht in revenue this year, about 87%
generated from sales of housing units and the rest from rental income. During
the first six months, the company recorded 5.13 billion baht in revenue, up 26%
year-on-year with 474 million baht in net profit, up 111%.
Its revenue in the second quarter was 2.62 billion baht, up 28%, while profit
rose 224% to 243 million baht.He said the growth in revenue was the result of
business expansion to cover mid-market customers with townhome products under
the Casa brand.
QH plans 13 developments worth 21 billion baht next year _ two or more of them
townhouses and the rest detached houses. It projects 20% growth in revenue from
housing sales next year.
source: Bkk Post
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Thursday, 23 August 2007 |
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The listed developer Prinsiri Plc is still confident in the condominium
market with a plan to launch at least three new projects worth a combined five
billion baht next year, according to assistant managing director Numchai
Wanaphanubeth.
Three high-rise projects will be in the Taksin area, about 200 metres from the
new BTS station; Pin Klao opposite Central Pin Klao; and in the Chatuchak area
near the BTS station.
It also plans low-rise condominiums in the Pattaya and Rama II areas. The
553-million-baht Pulse Pattaya Sai 2 will have eight floors with 209 units at an
average price of 2.64 million baht. It will be launched in the first quarter
next year.
Mr Numchai said the company had not yet finalised the plan for its Rama II site.
However, if the company decides to develop a condominium, it would have budget
units priced from 700,000 baht each. The company also plans about six
detached-house and townhouse projects next year.
Prinsiri plans another two projects worth a combined 900 million baht this year.
They are the 497-million-baht Prinyada Samakkee estate comprising 119 single
houses at an average price of 4.17 million baht a unit, and the 400-
million-baht Prinyaluck Samakkee with 207 townhouses averaging 1.93 million baht
a unit.
Last week, the company opened pre-sales of two projects worth 1.42 billion baht
in the Rama V area: the 504-million baht Prinyada Rama V with 156 duplex units
and the 918-million-baht Prinyaluck Rama V with 414 townhouses. The company sold
only two units during its launch event despite having hundreds of visitors.
Chath Kovitchindachai, vice-president for finance, said it was the first time
that the company had used a pre-sales approach so its marketing team would
adjust the strategy to turn visitors into buyers.
Altogether, Prinsiri has 3,582 units worth a combined 11.2 billion baht at an
average price of 3.12 million baht for sale this year. During the first half, it
recorded 3.376 billion baht in sales, up 41.7% from 2.86 billion in the same
period last year. Prinsiri targets six billion baht in sales for the full year.
The company realised 1.125 billion baht on revenue in the first half, about 12%
short of its projection. However, Mr Chath was confident that Prinsiri would be
able to reach the target of four billion baht through aggressive marketing of
single houses and townhouses on which revenue would be realised within this
year.
Prinsiri has a sales backlog of 3.4 billion baht, of which about 1.2 billion
baht would be realised this year and the rest next year. About half of its
projected revenue of six billion baht next year would come from the transfers of
three condominium projects.
Prinsiri also wants to increase its capital by offering 335 million shares, at
one-baht par value, to the public. However, the plan has delayed due to volatile
market conditions.
Mr Chath said Prinsiri still had sufficient cash flow to operate the planned
projects but the capital increase would expand its capacity to accumulate land
for future developments. It has set aside two billion baht this year to buy land
plots.
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