THAILAND offers some of Asia's best real estate investments. High-quality contemporary properties in prime locations continue to drive prices and build the country's position regionally, but players say government barriers for overseas buyers are crimping growth.
Bangkok's luxury condominium market achieved record prices six months ago when a penthouse suite at The Sukhothai Residences sold for 408 million baht (S$17 million) or 342,000 baht per square metre (psm). But while more than double the average cost of luxury accommodation in Bangkok, this was about half the cost of a similar apartment in Singapore or Hong Kong, where prices range from 655,000 to 667,000 baht psm, according to Jones Lang Lasalle.
The research also shows Bangkok properties generate more profit. Average rental yields are 4.8 to 5.1 per cent of the initial purchase price per year, compared with 3.1 per cent in Hong Kong and 2.7 per cent in Singapore.
More than 10,600 units will be completed in downtown Bangkok this year, of which 34 per cent will be high end, says CB Richard Ellis (CBRE).
Investing in quality properties close to Bangkok's underground and skytrain routes is the safest bet, says Songkran Issara, managing director of Charn Issara property developers.
'There is strong demand if a project is in the right location and of the right quality,' says Aliwassa Pathnadabutr, managing director of CBRE (Thailand). 'People are prepared to pay a high price for such products.'
She says Thai buyers at the top end of the market will typically pay up to 150,000 baht psm. And they will pay even more for top-end projects like The Sukhothai Residences, where 30 per cent of buyers are paying an average of 200,000 baht psm.
Developer Raimon Land says sales at The River, an 842-unit twin-tower development being built on the banks of Bangkok's Chaopraya River, demonstrate Thailand's investment potential. Prices there have risen from 145,000 to 250,000 baht psm since the sales launch in March 2007.
And some players reckon there is plenty of upside yet. 'The market is still undervalued and I expect significant growth over the next five years, especially at the high end,' says Darren White, president of real estate consultancy Binswanger (Thailand). 'Prices would rise again if young expats living here were able to borrow locally.'
Thai law prevents foreigners owning land, but non-Thais can buy 49 per cent of available freehold space in any condominium. Leases are a maximum 30 years, compared to a minimum 99 years in Singapore and other regional markets.
Bank of Thailand guidance advises financial institutions against loaning money to foreigners wanting to buy property locally. 'We'd like the government to drop restrictions on foreign ownership of condominiums,' says Raimon Land chief executive Nigel Cornick. 'Failing that, then a percentage increase or zones where there could be 100 per cent foreign ownership.'
The resort towns of Phuket and Pattaya are the most popular locations outside Bangkok for foreign investors, with Thais showing less interest in buying there. Mr Cornick says Raimon's Northpoint beachfront development in Pattaya has already hit the 49 per cent quota after its launch last November. 'If 100 per cent could be owned by overseas investors, we would have sold the whole project by now,' he said.
This article was first published in The Business Times on Jun 10, 2008
