Resort investment expected to remain strong

General news - Thursday December 13, 2007

Resort investment expected to remain strong

SOMPORN THAPANACHAI

Investment growth in resort tourist destinations is expected to remain strong next year, driven by foreign investors, while the growth in the residential market and other sectors would depend on government policy, according to the international real estate firm CB Richard Ellis.

Aliwassa Pathnadabutr, managing director of CBRE Thailand, said the resort market would see approximately 10 billion baht in foreign investment. The most notable investment was the 1,000-rai purchase in Phangnga by Hong Kong's Pacific Century Premium Developments Limited of Li Ka-Shing's family.

Other investors in resort projects in southern Thailand are Kingdom Hotel Investment group from Dubai and Hotel Properties Limited from Singapore.

For the overall real estate market, she said that without measures from the new government to support the real estate market next year, the industry should grow by 5-7%, which was not as good as it should be.

The property industry would like to see measures including tax incentives, the lifting of quotas for foreign purchases in condominiums to 70% from 49%, the extension of leaseholds to 90 years from 30, and greater certainty in the Foreign Business Act (FBA).

In 2007, office and retail markets were slow due to weak domestic demand and the impact of the FBA on the expansion and establishment of foreign companies. The take-up rate this year was anticipated at 150,000 square per metre or 26.5% less than last year. Rents for grade A offices in the central business district average 739 baht per sq m.

Ms Aliwassa said that the office rental rate in Thailand should reach 800 baht but the actual increase was only 2%. Rates in India and Vietnam were up over 30% with the highest in Bombay at 5,780 baht per sq m.

Condominiums recorded outstanding performance in 2007 with 52,600 units of completed downtown supply while the average price of grade A condominiums expected to reach 126,000 baht per sq m. The mid-range average price rose to between 65,000 and 80,000 baht per sq m.

The average price of luxury condominiums may increase by 15% next year, taking into account some projects where prices would be as high as 200,000 baht per sq m.

She said foreign buyers wanting to buy Thai condominiums were restricted by the 49% quota. She added that it would be possible for more luxury units to be sold on a leasehold basis.

New supply for both single houses and townhouse this year is projected to drop by 20% and companies have to speed up sales of their stocks so the outlook next year was still weak. However, the completion of the Outer Ring Road in southern Bangkok will open new development areas.

Based on data from the first half, the company projected that new supply for 2007 would be 64,000 units or 17.95% lower than 78,000 units in 2006.

The industrial sector was another booming sector in 2007 with sales of 2,611 rai in industrial estates, up 40% from 2006, while ready-built factories had an 86% occupancy rate. More transactions are expected next year as Board of Investment-approved projects in the first nine months of 2007 doubled in value from a year earlier.

Bangkok Post