According to a recent report by property consultancy firm CBRE (Thailand) the demand for prime central business district (CBD) land in Bangkok for investment remains strong despite the ongoing political turmoil.
CBRE says it does not expect the political problems to impact Bangkok CBD land prices adversely because there is a limited supply of freehold prime land in the Thai capital. There are few willing sellers and the majority of land is held by cash-rich owners, who inherited their family land.
Land holding expenses are very low as most land was not acquired through debt financing. There is virtually no land holding tax and no inheritance tax. This means that the majority of land owners have very little pressure to sell.
Transactions normally occur when the potential vendors are sufficiently enticed with a record breaking offer price. Over recent years, land prices have been driven upwards by developers buying sites to build condominiums for sale. This is because condominium developers have been able to outbid other types of property developer due to the high condominium development margins and the quick project turnover.
Historically, land investment in Bangkok’s CBD has provided one of the highest investment returns with about 15% year-on-year increases over recent years. This has enticed wealthy families to buy land and construct income producing developments despite low initial income yields because they are attracted by the capital gain driven by land values.
According to Ms. Kulwadee Sawangsri, Head of Investment and Land Services at CBRE (Thailand), the price for a prime site on the main Sukhumvit Road increased by approximately 480% since 2002 to THB 1.5 million per sq. wah, which is the highest percentage increase out of all of Bangkok’s prime areas. This is followed by the Silom/Sathorn area with an increase of approximately 400% to THB 1.4 million per sq. wah and the Ploenchit/Lumpini area at approximately 320% to THB 1.5 million per sq. wah.
There have been significant land price increases in some suburban areas where construction progress of new mass transit lines has triggered an increase in demand for condominium development sites in areas such as Rathanathibet along the route of the Purple line. Land prices in the Rathanathibet area have increased by 30–50% per year since the start of construction on the Purple line. CBRE expects that expansion of the mass transit system will have similar effects on land prices in other suburban areas.
CBRE believes that the centre of Bangkok will continue to be the most sought after location for the best quality offices, hotels, shopping centres and residences. This means that there will be continued demand in the future for the limited number of prime development sites in Bangkok’s CBD.
“Prime CBD sites in Bangkok remain in high demand. Currently, vendors are asking future prices for their land as there is no pressure to sell. I believe that the land market will remain active this year if vendors are willing to deal at the current market prices,” Ms Kulwadee said.
