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IS PROPERTY STILL A GOOD INVESTMENT?

One developer thinks it's better to invest in something solid than to sit on cash As the global economic storm continues to batter investors large and small, a long-standing safeguard for the average person has been to diversify investment as a key strategy for survival. Certainly Chotipol Techakraisri, executive director of Pace Development, believes this is a sound strategy because holding 100% cash is not the best way to handle one's finances under any economic circumstances. "Smart saving means allocating money into different assets, doesn't it? Just because the economy is shaky doesn't mean you stay still and just keep your money in the bank," he said. His company is counting on some well-heeled investors considering property, specifically its super-luxurious Saladaeng Residences condominium, which recently opened a show unit in the U-Chuliang building in Bangkok. This standard advice usually means channeling money to buy government bonds and stocks, among other assets. However, as global stock markets have been very volatile, property does crop up as a long-term haven, even though real estate prices have plunged substantially in the US, UK, Hong Kong and Singapore, as well as in other markets. Mr Chotipol says buying property is still a good long-term proposition provided one chooses strong projects that will definitely get built by reliable developers. He added that the Asian economic crisis had led to both Thai banks and developers becoming much more careful. "We learned a lesson before [Western economies] did and we have been following this lesson for a while now, so I don't think we will repeat what they have done." If one is considering investing in property in these dangerous times, the key issue is which segments are buoyant. In Mr Chotipol's opinion all segments are affected to a greater or lesser degree by the present economic turmoil, but each have some outstanding projects that would move ahead. "It isn't likely that every project in the budget condo segment will succeed or every high-end condo development will fail. More likely there will be a mixture of those that will make it and those that won't." It is this rationale that led to Pace Development, which earlier developed the well-received Ficus Lane low-rise condominium in Sukhumvit Soi 44/1, to open sales of Saladaeng Residences at the end of last month. Located in the heart of the central business district, this 132-unit high rise soars 25 floors. The prices are also steep at 160,000 baht a square metre. Construction started last August and is expected to be finished in June 2011. In fact, it is the lower construction cost that convinced Mr Chotipol to launch the project. With the prices of many construction materials having plummeted, this is certainly the best time to build for those who have the cash. Another determining factor was the location, in an area deemed to be among the most expensive in Bangkok. "Taking a long-term view, say five years' time, there is practically no land left to develop a project in Sala Daeng - this is in fact the last chance on Sala Daeng. "But on Sukhumvit, currently there are at least 10 projects to choose from and there is vacant land for future projects, so scarcity is the real difference." He also does not feel the expansion of mass transit rail systems will affect good projects in the central business district because this zone has not spread out. No marketing has been launched overseas because it is expected that those who have been in Thailand for a long time or know the country well would be drawn to the development. Also, the total of only 132 units makes an aggressive overseas sales campaign unnecessary. Mr Chotipol and his brother Sorapoj Techakraisri are not newcomers to the industry. Their parents were among the founders of the L.P.N. Development Plc, the local leader in the budget condo market. "The decision to build Ficus Lane and Saladaeng Residences was not like suddenly jumping into the business. We have been hearing about all this at home for 20 years now. We were just kids when L.P.N. opened its first building on Rama IV and have been hearing about property throughout, so we assimilated a lot. However, while we have this background and experience, we wanted to move out and adapt our experience and do something else." The show unit at U-Chuliang does display sound knowledge of both real estate and interior decor. The remarkable details underscore the difference between top-notch and mediocre products and among these are built-in skirting boards and teak flooring bleached to look like the lighter maple wood in colour, with some parts of the floor fitted out with imported stone. There is also centrally controlled lighting by Biticino permitting the selection of different moods and environments. While seeing property as a good investment choice, Mr Chotipol admits that the impact of the global crisis would lead to prices softening, but he does not expect this to be substantial because Thai developers, particularly the bigger ones, are in a stronger financial position than some of their Western counterparts. Discounts should be available among those people who have booked units and now have to resell their contracts because of financial problems. Some developers also might sell the last few units at lower prices in order to close their projects quickly.

 

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