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Local shift in investment

Bangkok Post May 23, 2009

Local investors are likely to play a key role in the property market in the downturn, according to the latest investment report from international consulting firm Colliers International.

The report found that industry players expect the local market to prefer domestic assets because overseas markets may continue to carry a higher degree of uncertainty over the near term.

In the first quarter, local real estate continued to interest a broad range of investors, including property funds and major developers, as property in Thailand is still cheaper than in many Asian countries, said Colliers research.

A major transaction in the first quarter was SMC Motor Plc's purchase of 3,400 square metres of retail space on Ratchadaphisek-Tha Phra Road for B53m from Chaopraya Mahanakorn Co.

Foreign property funds with strong financial status have been waiting for the right entry level to acquire Thai real estate. Investors have been keenest on land plots, followed by hotels and offices. However, as prime condominium prices flatten, land prices based on the sector's future appreciation now look expensive.

The shutdown of Suvarnabhumi Airport has scared off many foreign investors and buyers. The local property market has seen fewer retail sales to foreigners, who often buy in a high season from December to February, as well as less institutional and corporate investment.

Over recent years, one of the major foreign investors in Thai property has been Lehman Brothers, which is now in Chapter 11 bankruptcy in the US and has no need to speed up the sale of its property projects to raise funds.

Lehman Brothers (Thailand) has accumulated investment in real estate in Thailand of 50 billion baht. Key assets include Pacific Place, Mercury Building, Ital-Thai Building and undeveloped land in Koh Samui, as well as shares in Grande Asset.

"While many investors are targeting these assets, the complications of ownership and equity structures may delay the final deals. It is also not clear whether investors will be able to achieve discounted prices on these assets in the near future," the report said.