PROPERTY BANGKOK REPORT
The housing situation in Thailand is looking bleak for homeowners who are paying mortgages off. More jobs are going and unemployment is starting to increase. The government has helped the workers by their 200baht per each social welfare worker fund but this is only a temporary measure. The Red shirts of Thaksin are mobilizing to upset the Country even more so the country could find themselves in more of a mess. Is it a good time to buy---only if you have adequate funds and buy a condo but do your homework first.
IS PROPERTY STILL A GOOD INVESTMENT IN BANGKOK AND THAILAND?
Bangkok Post Mar 22, 2009
One developer thinks it's better to invest in something solid than to sit on cash but then of cause they will say this??? but be careful of hidden sales tactics
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.
Foreigners seek bargains
The Nation March 24, 2009
Of course foreigners will speculate wherever they can then inflate land values as they go. This is the norm that escalated to the present sub prime crises but Thailand has preventive measures in place to curb this.
Strong interest in depressed assets, which are going 30% cheaper than last year Declines in the prices of land and residential projects have prompted some foreigners to expand their investments in Thailand's property market, especially condominiums. According to a survey by The Nation conducted last week, foreign investors are confident that it is a good time to buy Thai property, both in Bangkok and upcountry. Some have shown a strong interest in buying depressed assets, which are going for 20 to 30 per cent less than last year.
Interest is also being shown in undeveloped land for the purposes of developing residential projects, as land prices are down 10 to 20 per cent from last year. Hub Soon Global Corporation Singapore subsidiary United Motor Works (Siam) has set up a joint venture with Chiwathai, called Chiwathai Hub Soon, to develop a low-rise condominium project. Worth Bt350 million, the project is called The Surawong by Chiwathai Hub Soon. The company also plans to buy undeveloped land and take over existing residential projects worth nearly Bt1 billion this year and next, director Henry Heng said.
"We believe that Thailand's |property market [is attractive to] foreign investors, as land and |residential project prices are now cheaper than last year," he said.
Property management firm Akando, whose clients include Lizmans Property Fund, plans to take over a residential project on Rama IX Road in the capital worth Bt2 billion this year. The project is already under construction but the owner wants to sell. This follows Akando's purchase of three other Bangkok condominium projects in Lat Phrao, Suthisarn and Rama III Road, starting last year. Managing director Joel Feldman said the company has a strong interest in buying or taking over property projects, with land and residential prices having dropped significantly because of financial difficulties faced by land and residential project owners. Almost all of these owners have lowered their prices in an effort to secure sales, he said. "We believe this is a good time to invest in Thai property, because we expect the US economy to recover in the last quarter of this year, which should drive Thailand's economic recovery," he said.
ECC Group, a Netherlands-based retail developer, has set aside an investment budget of US$90 million (Bt3.24 billion) to develop a large-scale shopping mall called Promenada in Chiang Mai.
Chairman and founder Dion LJ Heijmans said revenue from shopping malls in Asia is projected to grow by more than 10 per cent a year, compared to growth of just 4 to 5 per cent for the group's Promenada brand in European markets. Having chosen Chiang Mai for its first project in Thailand, ECC will next consider entering the Bangkok market. Heijmans said construction of the Promenada on Chiang Mai's Ban Sahakorn Road would start by year's end, with the opening scheduled for the last quarter of 2011. The group is also seeking a good location in Bangkok with space of at least 100,000 square metres for a two-storey shopping mall. Other potential locations include Phuket, Hua Hin and Pattaya, he said.
PROPERTY TO FURTHER SLIDE
Bangkok Post Mar 22, 2009
The managing director of Equipnet Southeast Asia Ltd believes property values are heading for a slide before bouncing back in a few years
While Thailand cannot escape the global plunge in property values, those able to hold on to their assets should see prices bounce back in three to four years, when inflation is expected to revive on the back of the printing of more money to resolve economic problems in the West, says Scott Bolls, managing director of Equipnet Southeast Asia Ltd. Printing more money would inject liquidity into the system, and also would eventually lead to inflation which in turn would push up prices. But, he added, the big concern right now is how far values in Thailand will slide before the situation changes.
"It's another three years; that's a long time and we have all got to weather the storm," says Mr Bolls, who specialises in appraisals. A lot of developers in Phuket and Samui are hurting right now because they were relying heavily on offshore money, particularly from Singapore and Hong Kong, but these two Asian financial hubs are going through tough times. Key buyers like investment bankers are losing their jobs, and obviously those who are jobless are unlikely to buy luxury condominiums and villas.
"Pattaya is very hard hit right now - Hua Hin not so much because that is more of a Thai market," he said.
In Bangkok, Mr Bolls estimates that the central business district (CBD) has not been very much affected so far, though real estate prices are down by about 8%. However, outside Bangkok prices have plunged by as much as 20%. While pointing out that he does not have a crystal ball, he does expect property prices to slide further based on what is happening in the rest of the world. Mr Bolls said that sometimes a country can be complacent and shrug off the opinions of experts, as happened in Germany after unification. There was a honeymoon period that led to prices bubbling up, but Mr Bolls recalls attending a conference there at which experts warned people to brace for a fall. Few believed them, but eventually prices fell dramatically. "I think it's going to happen here too." While this means there are some good buying opportunities right now for those with cash in hand, there should be a lot more further down the road.
"In the CBD there is not a whole lot of great value yet, prices are still holding. There is a little bit of drop but they could go down more. With the current developments there is more supply right now than there is demand because there is no foreign money coming into Bangkok anymore. It's going to hurt these developers so there are going to be some good buys coming up."
Cash-rich investors are advised to consider buying condos that can be rented out to Thais for 10,000 baht a month. He added: "Farangs, if they lose their jobs, are not going to be staying in these 125,000-baht-a-month condos." Mr Bolls pointed out that the office market is also having problems, with rental prices in Singapore having plunged 20-30%. Also badly shaken is the global equipment market. Equipnet is receiving a lot of requests from companies worldwide to sell their machines, although equipment is the heart of any manufacturing process.
"It hasn't hit Thailand so much but we are finding that in other parts of the world, especially the US and Canada, companies are selling equipment at deep, deep discounts. Prices have plummeted in the last four to five months - down by 30-40% in some cases." However, some companies do not recognise that prices have dropped, for example a company in the Philippines that Mr Bolls dealt with. This company is still unable to sell its equipment, thus depriving it of much needed liquidity. Mr bolls advises those in need of money to sell their assets right away. "Sell now before it really cracks. I think now is the time to sell and it's going to be a good three years before things turn around again. It may be even longer than that.
"We are facing a worldwide meltdown, not a regional meltdown. It's worse now because we have got all the superpowers in trouble - the UK, England and Japan are all having difficulty and they are not investing." Mr Bolls added that a safe rule for leveraging is to not take less than 50% of the asset value. "There is a rule in real estate development that if you stick to the 50% leverage you are going to be okay." Although Thai banks have been strict on giving out loans, with even Thai nationals often only able to get 60-70% of a property's value, this country cannot escape the global economic tsunami.
"Thailand's real estate market has relied a lot on overseas investors from Singapore and Hong Kong. Those countries have been investing in Thailand and now they can't, which ultimately is going to affect the market here. "And the rules and regulations in Thailand in a way defeat the purpose, because it's difficult for foreigners to own property. So that's another thing that is going to hurt Thailand even more.
"One of our clients built four big villas [in Phuket] and he hasn't sold any of them yet, and these are 30-40 million baht villas. Who is going to buy them? You know the price has to go down, but how far can it go? People just don't have the money to buy them." While some argue that Thai property prices are cheaper than in some other Asian countries, Mr Bolls pointed out the luxury end is not cheap. That prices in Hong Kong and Singapore are higher is because these places are perceived to have a more serious business environment than Thailand, he added.
.LAND AREAS: 1 rai = 4 ngarn = 400 wah2 = 1600 m2; 1 talang wah = wah2 = 4 m2; 1 acre = 2.53 rai & 1 ha = 6.25 rai
To date foreigners may own
- a unit in a registered Condominium
- a building (as distinct from its land)
- a registered leasehold of up to 30 years for all types of titled land (and/or buildings).
- a company can purchase land and buildings only.
- more than 49% of a condominium unless in Company form.If BOI status different
- foreigners can own land being not over 49% in a proper Business orientated company but cannot secure a mortgage. Under BOI can buy.
- if you invest 40m baht you can buy 1 Rai of land in Thailand outright
A 30-year lease can be a good idea with right to renewal to a freehold purchase, or a Thai company (7 PARTNERS) can be established with Thai majority shareholders. Foreigners only own 49% shares in a company but there are restrictions and rules to this as you must have a business running and audited. The other way is to lease for 30 years with R of R or to use an Usufract or superficies to assist you. We can assist you to make sure your company is safeguarded. Remember if you need advice ask us.
Beware as its not the first time when foreign Business partners have been cheated by Thai partners. It has happened a lot. Never have a limited Partnership in Thailand and make sure the Lawyer you use is straight and unbiased towards you? Go to www.chiangmailaw.com for any help or www.thaiexpatlaw.com
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WHEN TO PAY FOR YOUR PROPERTY
1/. Never pay deposit or booking fee over the Internet. See what you buy first
2/. Look at progress payment reports when, & how much
3/. Check the builder before you sign
4/. Talk to neighbours & others about the Moo Baan or buildings.
5/. Have a person on site to inspect interim work for you
6/. Do not be bullied into progress payments before work completed. If so then some middle man is getting his cut.
7/. When in doubt ask. Seek advice
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