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Bangkok real estate: Investment activity
slows as buyers hold out for price cuts
Despite continued interest and more properties offered for
sale, investment activity in the Bangkok property market has been subdued as
there remains a wide gap between buyers’ and sellers’ price expectations,
according to Jones Lang LaSalle, a professional services firm specializing in
real estate.
Suphin Mechuchep, Managing Director of Jones Lang LaSalle, said “Buy-side
interest in the Bangkok property market remains strong; however, investors are
mostly looking for distressed assets offered at deeply discounted prices. At the
same time, sellers refuse to dispose of their property assets at a loss, despite
accepting the softer market conditions. As a result, investment activity in the
Bangkok property market over recent months has stagnated, with buyers continuing
to adopt a wait-and-see attitude, expecting prices to drop in response to the
perception of value.”
Umpon Thepnumsommanus, Director of Investments at Jones Lang LaSalle said “Over
recent months, we have continued to receive enquiries from investors looking for
properties available for sale in and around Bangkok. However, all of the
enquiries were driven by the search for distressed property assets.”
Jones Lang LaSalle have also been appointed by several landlords to help dispose
of their real estate assets, ranging from vacant land plots, sites for
redevelopment and office buildings to industrial properties. A number of these
properties belong to companies that are looking to dispose surplus properties
and shore up their balance sheets.
“Whilst buyers are expecting to acquire the property at a deeply discounted
price, sellers have yet to encounter financial conditions which would force them
to accept losses on disposing these properties,” Umpon explains. “We have so far
seen certain landlords only willing to reduce asking prices,” he added.
The general consensus is that property values are trending downward. However,
the magnitude of the decline in property values is highly uncertain. “There have
been very few property investment transactions since last year to date. As a
result, real transactions against which to benchmark are scarce. For example,
land on Sathorn Road was transacted at 500,000 baht per square wah in 2005 and
800,000 baht per sq wah in 2008. So far this year, there have been no land
transactions to support the notion that land prices in this area have dropped.
Furthermore, even if the land were put up for resale now, whether the owner
would accept the price below the purchase value remains questionable,” said
Suphin.
“In the current environment, sellers of real estate are lowering their asking
prices. Nevertheless, conditions are thus far different from those during the
Tom Yum Kung crisis when owners were forced to sell their property assets at a
loss.”
As long as leverage does not become a major issue, asking prices could hold
sway. “While it may be frustrating for buyers expecting bargains in distressed
property, we have so far yet to see any distress which would force a sale.
Furthermore, owners may continue to absorb the opportunity costs associated with
leaving real estate underutilized,” Suphin added.
The Thai government has recently pledged to introduce taxes on unused land in an
effort to widen its revenue collection base.
Whilst the government may need 1-2 years to draft the new property tax
structure, some parties have already expressed concerns over the plan, which may
mean additional burdens on landowners and push land values down as holding
vacant land becomes more expensive.
“Land tax will not only help to boost the government’s revenue but also
encourage owners to make use of their land. Professional developers, these days,
tend to focus mainly on land plots for immediate development rather than buying
land without a specific and concrete plan of what and when to develop. Relative
to the speculative land buyers, these professional developers should be less
impacted by a new land tax,” Suphin said.
Developed countries around the world have different property tax structures,
which vary in terms of the percentage, the type of property and by whom the tax
is collected. For example, in Australia both local government authorities and
states levy taxes on an annual basis. In Taiwan, the taxes on holding real
estate may be based on both a land assessment and a building assessment, with
rates varying on location and type of usage. Japan makes a Fixed Asset Tax and
City Planning Tax payable on the assessable value of a property. In Singapore,
the tax rates are based on the Annual Value of the property, which is the
estimated yearly rent the property could fetch if it were rented out.
According to the Fiscal Policy Office, the proposed property tax rates for
Thailand range from 0.05% to 0.5% of the property value, depending on the types
of land use.
“Besides determining the optimal tax rate for various land uses, the government
should ensure efficient and transparent mechanisms for tax collection,” said
Suphin. “It should also raise valuation standards to ensure that assessments are
made on values which reflect market prices.”
“Apart from a source of revenue which can be used to fund services at a local
level, a sound tax structure should promote the efficient use of land and real
estate. Nevertheless, the overall impact should be thoroughly studied to ensure
against unintended consequences such as more urban sprawl. We do believe that
the initiative shows strong leadership on the part of this government to promote
efficiency in the economy.” (Jones Lang LaSalle, Thailand)
Asian investment property market turns down in second half as sentiment fades
The effects of the global financial market upheaval and the deflating world
economy slowed Asian investment property markets significantly during the second
half of 2008. The unprecedented events of the past six months have eroded
investor, occupier, consumer and overall business confidence, resulting in
falling property prices and reduced investment activity, along with declining
retail spending and external trade across the region, according to CB Richard
Ellis’ Asia Investment MarketView Report for the second half of 2008.
With banks adopting a conservative approach towards lending for property
acquisition, the Asian investment market suffered from record low investment
volume in the July – December period as prospective buyers delayed acquisitions
until the market shows signs of stabilizing. Investors and lenders re-assessed
their appetite for risk as raising capital proved to be an increasingly
difficult task amid a widespread correction in property prices.
While valuations in Thailand have not fallen at the rate seen in other Asian
markets, few transactions were concluded during this period, as buyers and
sellers opted to remain on the sidelines in view of global financial worries and
local political uncertainty. The period saw buyer and seller expectations widen
with many purchasers hoping for distressed assets to come onto the market and
sellers unwilling to drop prices below a certain level.
“In recent weeks, we have seen an increasing availability of land for sale
within Bangkok’s CBD. Some investors are freeing up cash as they expect other
property assets, including revenue-generating buildings, to come onto the market
in the coming months,” states Kulwadee Sawangsri, Director of Investment & Land
Services at CB Richard Ellis Thailand. “It appears that land prices peaked in
2008, and landowners who do not plan to develop their land in the near future
are now considering selling those plots.
“The situation in Thailand is very different to many other Asian countries, and
cannot be compared to the difficulties we faced in 1997,” she added. “The debt
levels on existing, completed buildings are much lower this time. In the office
and retail sectors, there is limited future supply under construction.”
Things were worse in Singapore, where the S$3.93 billion investment volume
recorded during the review period brought the 2008 total to just S$17.84
billion, 70% down on the S$54.02 billion recorded in 2007. In Japan, a number of
institutional funds aborted planned property acquisitions as the credit crunch
compelled many developers to consolidate while a rising number of real estate
firms were forced to seek bankruptcy protection.
Investor confidence in Hong Kong was shaken by the escalation of the global
financial turmoil with potential purchasers displaying a cautionary attitude
towards buying property as worries over potential layoffs and bankruptcies
dominated the headlines. The investment market in China suffered from dampened
investor sentiment, prolonged negotiations, aborted deals and reduced prices
during the second half of the year as the Chinese economy slowed.
In South Korea, there were a number of transactions involving office buildings
as foreign investors exited the local real estate market. Investor sentiment and
business confidence has deteriorated significantly, and the stock of commercial
property available for sale has increased as institutional investors offload
real estate from their portfolios in order to shore-up liquidity. (CBRE
Thailand)
Raimon Land partners Bumrungrad International Hospital in
prestigious healthcare promotion
Raimon Land Customer Relations
Management Director, Neerja Sachdev (second right) is joined by Bumrungrad
International’s Senior Manager - Thai Marketing, Oranuch Nilpradit and
Orthopaedic Surgeon Dr Nanthadej Hiranyasthiti and Raimon Land’s Senior Vice
President Marketing, Tanrawee Pipatpolkul.
Luxury property developer Raimon Land recently launched the
BWELL card in association with Bumrungrad International Hospital to offer its
customers a wide range of discounted healthcare benefits.
Buyers of Raimon Land’s developments in Bangkok, Pattaya and Phuket will be able
to enjoy special privileges at the prestigious hospital in a move aimed at
boosting the developer’s customer relationship management programme and start
2009 off on a healthy note.
Raimon Land Customer Relations Management Director, Neerja Sachdev, said the
initiative was designed to further build value for customers and offer them
highly personalised levels of service, including ensured priority access to all
of Bumrungrad’s facilities.
“We are thrilled to partner with such a well-respected hospital brand that is
able to provide benefits to our customers and give them a taste of the exclusive
lifestyle that they have bought into by purchasing one of our luxurious
condominiums,” she said.
Raimon Land launched the promotion with a BWELL Health Day for customers and
their families and friends at The Lofts Yennakart on January 31.
Staff from Bumrungrad International Hospital provided free body mass analysis,
bone density checks and blood pressure checks from 10.00am to 3.00pm, with
distinguished orthopaedic surgeon Dr Nanthadej Hiranyasthiti on hand to lead a
discussion on back pain.
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