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Challenging conditions fail to dent luxury market

source: Raimon Land/Bkk Post July 28 2008 In a climate clouded by rising construction costs, an uncertain political situation and a stagnating world economy, demand for luxury condominiums in Bangkok and Thailand's resort areas remains strong with sales exceeding targets. This strong performance reflects the positive sentiment among investors that Thailand's property sector can continue to expect sustained demand throughout this year and beyond. This is particularly true of high-end condominiums, which are driving the market forward. Last year, despite political tension, inner-city Bangkok condominium sales rose 3% thanks to a second-half surge. Achieved prices and sales performances were particularly strong, with investors prepared to pay an additional 50% over the median price to secure the finest inner-city properties. While political instability dented international buyer perceptions and some investors held back, a remarkable resilience remains, particularly from regional buyers who recognise the long-term value, low cost of living and lifestyle appeal of Thailand. Those who are familiar with Thailand and visit frequently on holiday are still buyers, but first-timers out of Europe are far more circumspect about decisions. Residents of Asia seem less concerned about political instability, particularly expatriates based in Hong Kong, Singapore and Shanghai, who see good potential for a second home, a retirement home in a terrific location, or a solid investment opportunity. An good example is The River, Raimon Land's high-end lifestyle project on the Chao Phraya River, where higher-than-expected takeup has lifted sales past seven billion baht in June, or 58% of the targeted 12 billion. This surge in demand, more than 800 million baht over the target to date, prompted the release the project's South Tower's higher units earlier than planned. Since pre-launching the 851-unit project in March 2007, during which the limited number of units released were sold within three days, 492 condos have been incrementally released, with 418 sold through June. The industry confirmed its recovery by getting off to a strong start in 2008. Sales in The River for February alone topped one billion baht, and all subsequent months, except April with the Songkran holiday, surpassed their target of 300 million. Research published recently by Raimon Land in its Condominium Focus Thailand, shows that condominiums have become the fastest growing segment in the residential property market, with luxury developments emerging as an alternative for many local investors who traditionally looked to the mid- and lower end of the sector. The launch of new projects is also generating buying interest among investors, and a broadening economy is underpinning demand for quality residential assets. The 47-storey, 196-unit Sukhothai Residences is testament to this, attracting strong interest since its launch late last year. A total of 70% of the units have been sold for between 205,000 and 343,000 baht per square metre. To many, Thailand remains fundamentally one of the more attractive Asian destinations, with economic growth expected to maintain its 4% to 5% pace over 2008 and 2009. Currently, foreign buyers account for the bulk of condominium purchases in Thailand's resort areas, though the most active markets have changed. The profile of Raimon buyers in 2007 shows Russians catapulting from outside the Top 10 to lead resort condominium purchases with 23% of the total value of funds, followed by Thais (15%), British (10%) and Australians (9%). The bottom line is that property pricing is still tremendously low if compared to regional or international markets. Investors are also realising impressive returns in top resort areas. Pattaya offers a superb opportunity to realise both strong short-term gains as well as long-term growth through investments in Grade A condominium developments. Raimon Land launched the 376-unit, twin-tower Northpoint project - located on a 12-rai beachfront site at Wong Amart - in November 2006, and to date, it has achieved an average per-square-metre (psm) price of 120,219 baht on the 252 units sold. Sales at Northpoint remain brisk in 2008, with buyers signing up for 59 units worth 591 million baht at an average price of 120,592 baht psm from Jan 8 to March 11. Raimon Land remains confident in Thailand as exhibited in our recent launch of The Lofts Southshore in Pattaya, a high-quality, mid-range development combining resort living with a modern urban lifestyle. First-day sales exceeded 730 million baht. This project brings Bangkok's established "The Lofts" lifestyle concept of providing a quality modern urban design and functionality at an affordable price to Pattaya, and has the potential of returning strong capital gains and high rental yields. The 330-unit Reflections Jomtien Beach Pattaya has also seen strong results with 50% of its units already sold at prices starting at 100,000 baht psm, which again demonstrates that there remains strong demand for luxury condominiums in Thailand, despite the ongoing political turbulence. Nigel Cornick is Chief Executive Officer of Raimon Land Plc

 

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