The Value of Thailand’s Construction Industry Might Reduce In 2009

The value of Thailand's construction industry might reduce by 50% in 2009 i.e. approximately 320 billion baht from 650 billion baht in last year. This decrease is mainly because of a huge decline in both public and private investments

Experts expects that public investment in the construction industry might reduce to 27.2% i.e. 160 billion baht this year, which was around 220 billion baht in 2008. They also expect that private sector might have to experience its worst situation as investment in that sector might go down by 64.4% i.e. 160 billion baht, which was 450 billion baht in 2008.

As the figures of Commerce Ministry reveal that approximately 2,904 construction and property companies were closed in 2008. Out of these 2,904 approximately 600 were construction companies.

The Thailand contractors association considers that the business of building design firms will also witness a decline of approximately 70% as the construction of many projects are postponed till June 2010 because of global economic recession. Also because of this fact many workers will loose their job in 2009. The association believes that approximately 1.6 million workers will be jobless in 2009.

Earlier in 2008 the construction industry was badly affected by the price hike of raw materials required for construction. The price of raw materials decreased in the final quarter of 2008. This decrease in price has caused trouble to many construction firms which have purchased a lot of raw material instead of price hike.

The association has further requested the government to support projects by investing on them. This will also help to support the financial system as well as construction industry. The projects could be anything like road construction, water reservoirs, schools and hospitals.

Six Senses Is Ready To Launch Its First Property in Thailand

The Six Senses group is all set to launch its first property in Thailand. This project is named Soneva Kiri. It consists of about 20 private apartments next to the hotel’s 42 pool villas. The asking price for the apartments is around US$4.5 million –US$7.5 million, consisting of a living space of nearly 1600m2 and just 2 acres of private land.

Buyers who are interested can select from 4 and 6 bedroom villas. These villas are available on both beach front and hill top. These villas also avail magnificent view of Gulf of Thailand.

The six senses group is mainly looking forward to long term purchasers i.e. who know very well the significance of long term investment. Most of the purchasers till now are repeaters.

The main concept of Six Senses resorts is ‘eco-chic’ i.e. making available extremely luxurious yet environment friendly properties. They also consider that the villa owners will be definitely entering into a new lifestyle. Six Senses group are launching projects in Asia Indian Ocean and Oman.

Six Senses is further providing several other facilities to the purchasers such as the purchasers can easily have access of a luxury private boat, they can avail 20% discount on resort services, they can also avail 20% discount on all type of resort facilities, and they will also get membership of Soneva club.

Six Senses group is also planning to utilize its 8-seater Cessna plane to avail transport to it’s guests and villa purchasers to Soneva Kiri from Bangkok and other places across the Asia. They are also planning to purchase bigger aero planes for this purpose. Although, they also have fear that the global economic recession might have influence on the sale figure of Soneva Kiri.

Most of the High end earners are in search of villas which have lifestyle together with location. And as per their requirement Soneva Kiri is the perfect choice.

Siam Commercial Bank Is Not Yet Ready To Decrease Its Mortgage Loan Rates

Siam Commercial Bank is yet not ready to decrease its mortgage loan rates in spite of continuous decrease in interest rates.

It has recently launched a new bill payment service. By which all sort of monthly payments can be done directly from credit card and no extra document is needed.

As per the executive vice-president of SCB, they consider that the mortgage rates being availed to the consumers at present are already quite low, so there is no chance of decreasing them further. The Bank is availing fixed rates of 3% and 5% for the initial 5 years of mortgage loans to its customers. He further added that to meet the present circumstances they are already decreasing their interest rates with respect to the decreasing demand.

It’s been observed that nowadays most of the borrowers prefer to have floating rate packages instead of fixed rate packages. This is so because the floating rate packages give them the benefit of constantly decreasing interest rates. In an observation it is revealed that just 70% of loan applications in SCB are for fixed rate loan packages, which used to be 80% in 2008.

Experts believe that as the leading authorities are trying to come out of the economic recession market rates will decrease further, as a result most of the local banks will also reduce their deposit and key lending rates in the coming weeks.

The demand for housing loans is decreasing because of constantly slowing financial system and poor housing market conditions.

SCB has made its target to get at least 55 billion baht of fresh loans in 2009, which will show a development of around 20-25% on its existing mortgage portfolio.

SCB has although constricted its lending standards because of the continuously slowing economy.

Asian Real Estate Investment Trust Market Hit by Recession

Asian Real Estate Investment Trust market is strongly hit by the global economic recession. REIT has observed its figures sliding steeply in the last six months of 2008.

To come out of the recession Asian REITs are trying to keep hold of their renters in 2009 by concentrating on cost saving methods and saving the earnings.

Now it is expected that the property market will definitely witness much more ups and downs everywhere, as many REIT members are selling out their shares to pay out debts. Also many property investors are looking forward to the existing market situation, as they taking full benefit of the circumstances and trying to obtain good properties at very low prices.

In the current situation the market capitalization of REITs have gone down to just one third of what it was earlier. In the last six months of 2008 the market capitalization has decreased a lot and now it is just Baht 1.71 trillion. Almost all the Asian REIT markets have dropped a lot. Most of the markets have dropped to nearly 30%.

Singapore REIT was among those which are most affected by the recession. The recorded fall in Singapore REIT is approximately 54%. They are trying to gain some assistance from other REITs which are not that much affected by the recession to lend a hand in refinancing their balance dues. As the other REITs are not experiencing that much pressure of critical short term refinancing debt.

The Asian REIT has got 7 fresh listings in 2008. Among 7 only 1 listing was done in the second half of 2008.

Though, Thailand REIT had experienced a different result. About 8 funds have experienced fall of just 1-2% and the remaining six funds have witnessed a drop of approximately 20% in the same period of time.

Thai Developers Are Aiming At the Lower End of the Property Market

A well known Thai developer Sansiri is aiming at the lower end of the property market with its recent Habitia brand. This brand is planned to make use of pre-cast building techniques to cut prices.

They are making arrangements to launch 4-5 projects of value Bt4 billion in this brand in 2009, with a sales objective of Bt900 million in 2009, said Suriya Wannabuit, the managing director of Piwattana.

Single apartments constructed in this recent Habitia brand would be valued quite less than Sansiri’s individual budget brand, Saransiri - which is only around Bt3.5 million for each unit, whereas average sales value of Saransiri’s is around Bt4.7 million, he said.

“We will make an effort to be autonomous from the parent company’s brand, because several purchasers have very high hopes from this new brand,” he said.

The company is trying to make use of pre-cast building technologies with an approximate average of 20-21 units per month, at the time of constructing this segment, said a past Sansiri executive who recently came back to head Piwattana after spending 1 year with Preuksa Real Estate, a forge in the use of pre-cast building technologies.

The initial project to be launched in the recent brand is Habitia Ratchapruek, of approximate value Bt1.2 billion.

There will be around 364 single apartments varying in size from 136-172 square meter and priced about Bt 3- 5 million in this project.

The additional three projects under this brand are 2 single apartment projects and a townhouse project in Bang Yai and Rangsit. Townhouses will be valued at approximately Bt1.8-2.5 million.

Phuket Condominium Projects Presenting Exciting Offers to Attract Purchasers

Phuket’s West Sands incorporated resort expansion on Mai Khao Beach recently opened a ten percent Return of Investment program in December 2008. The ten percent assured Return of Investment is for the coming 5 years on Phase 2 of the project which consists of Town Home and Condominium units.

“In view of the fact that we have offered the ten percent Return of Investment program in December 2008, by now around10 units have been purchased by interested purchasers. It is observed that the majority of the purchasers belong to Switzerland, China, Japan and Russia. This exciting offer of ten percent assured return of investment program can efficiently get rid of the risk for all people who are in search of the prospect to invest on Phuket Island” said Marketing and Property Sales Director of West Sands.

The company is thinking about expanding the endorsement till the end of February 2009 on a first-come-first-served basis. Phase 1 of the west sands project was completely sold out in September 2008 and will very soon start in June 2009.

West Sands is soon going to be a Luxury Lifestyle Resort that will make available immense rental returns with unusual features like a state of the art Water Park , which will be the exclusive one in Phuket . West Sands will get approximately 40 percent to 50 percent enhanced habitation compared to other hotels and resorts as the unique business form of water park and apartments are going to be milestones in the property market.

Investment Activity Delays as Purchasers Hold Out For Price Reductions

In spite of constant awareness and additional properties available for sale, investment activity in the Bangkok real estate sector is not showing much positive response because price expectations of purchasers and sellers are far apart.

Investment interest in the Bangkok real estate sector continues to be strong; although, investors are mostly interested in distressed assets made available at discounted rates. Though, sellers don’t want to sell their properties at loss, even though they accept that the market conditions are not up to the mark. Consequently, investment activity in the Bangkok real estate sector has declined as purchasers like to adopt a wait-and-watch attitude, hoping prices to go down in response to the sensitivity of assessment.

In the past few months, it is observed that investors are much more interested in large land plots, office buildings or industrial properties in and around Bangkok.

At the same time as purchasers are looking forward to obtain a property at a much discounted cost, sellers have not yet met with the financial situation which would compel them to acknowledge losses on selling of properties. Up till now only a few landlords are ready to cut their asking prices.

The property values are sliding downwards. Although, the size of the decrease in property rates is very tentative. In the past 2-3 months only a few property investment transactions are recorded.

The government of Thailand has promised to begin a new tax on unused land in an endeavor to expand its revenue collection.

At the same time as the government will take approximately 2 years to plan this new property tax structure, a few developers have expressed distress over this plan, which mean more and more burdens on landowners.

Major developers now believe that investment activity in the Bangkok real estate sector may delay as purchasers are adopting a wait and watch attitude in anticipation of price reductions.

Interesting Steps Taken By Phuket Property Developers to Achieve Sales Target

Interesting Steps Taken By Phuket Property Developers to Achieve Sales Target

In Phuket, developers started adding incentives with the property like furniture’s etc. Even though many developers believe that reducing prices of property won’t raise the sale of property, as the current problem is regarding purchasers i.e. lack of purchasers. Due to the global economic recession probable purchasers are not confident about their upcoming earnings.

In the final week of January 2009 and the initial week of February 2009 transactions of approximately 25-35 million baht has been recorded. The actual situation in Phuket is that the majority of developers don’t have enough resources i.e. they neither have money to pay huge bills nor they can afford to hang around for better times.

The reality in Phuket is already acting quite more sensibly than any other global markets.

Peter Hamilton, Chief Executive of Campbell Kane said, “Phuket is in its early phase of development. Actually, the capital market that backs Phuket property investment is under developed. There are only some mortgages and the secondary market is in its childhood - even though we have observed that purchasers are ready to pay money for finished villas.”
Phuket is a quite secured place to invest as most of the property purchases are completed with cash. The truth is that the basics of Phuket property are outstanding, high quality properties are in command and developers do not aim to cut their prices.

“The upcoming sale target is hard to achieve. Though this is not only Thailand’s problem, the entire world is experiencing this issue. Though Phuket is holding up its price as such and sales volume quite well compared with its worldwide competition.”

Sarcastically, Thailand has already experienced many events like Asian financial crisis, SARS outbreak and tsunami in the past and so is surviving easily in this global economic recession.

Obviously, many developers are reducing prices on some properties for nearly 30% to motivate some interest of purchasers. Though, these are temporary and secluded attempts to entice purchasers.

Developers are presenting more and more incentives to the purchasers like furniture packages, guaranteed returns and even cars.

Wide Opening between Price Prospects in Property

Regardless of constant interest and additional properties up for sale, investment activity in the Bangkok property market has been unresponsive as there remains a wide opening between purchasers and sellers prospects.

Suphin Mechuchep, managing director of Jones Lang LaSalle, said interest in the Bangkok property market continued to be strong. Though, purchasers were generally looking for concerned assets obtainable at profound discounts.

All together, sellers decline to dispose of their property at a loss, in spite of uncomplaining the softer market circumstances. So, investment activity in the property market had declined, with purchasers abiding to adopt a wait-and-watch attitude.

“In recent months, we have been persistent to get enquiries from investors in hunt of large land plots, office buildings or industrial properties obtainable for sale in and around Bangkok. Though, all the enquiries were motivated by the search for concerned property assets,” said Umpon Thepnumsommanus, director of investments at Jones Lang LaSalle.

“At the same time as purchasers are expecting to obtain the property at a profoundly discounted price, sellers have yet to meet financial circumstances which would compel them to acknowledge losses,” Umpon said. “We have until now seen a few landlords only eager to decrease asking prices.”

The wide-ranging consent is that property values are declining. Though, the extent of the decline in property values is highly indecisive.

He said there have been only some property investment transactions since 2008 to date. Therefore, real transactions against which to standard are limited. For instance, land on Sathorn Road was transacted at Bt500,000 per square wah in 2005 and Bt800,000 in 2008. Until now in 2009, there has been not a single land transaction to sustain the concept that land prices in this area have plunged.

“In the present situation, sellers are lowering their asking prices. On the other hand, circumstances are up to now dissimilar from those during the tom yum kung disaster when owners were compelled to sell at a loss,” said Suphin.

Two Central Projects Put In a State Of Uncertainty

Central Group of Companies will holdup its investment plan to build two new shopping complexes in Chiang Rai and Chiang Mai because of financial uncertainties, says Prin Chirathivat, executive director for finance. Under the innovative plan, Central Pattana Plc, its retail and property arm, would build up the Chiang Mai project at the same time as Central has not allotted any subordinate to handle the complex in Chiang Rai.

“Although construction expenses at present are inexpensive than in the past because of a decrease in raw material prices, the company is not sure that it should risk beginning construction at the moment for the reason that consumer purchasing power does not appear to be recovering,” a CPN executive said.

In Chiang Mai, the second Central Plaza would be constructed on the superhighway next to Doi Saket Road. Construction would begin by the end of 2009 on 70 rai of land.

The project would have total space of 250,000 square meters and remaining commercial area of 100,000 sq m. It would be the biggest lifestyle retail complex in the North, featuring a Central Department Store, Tops Market, Power purchase, Super Sports, a fitness centre and over 200 retail shops.

The interior and exterior would attribute a “'modern Lanna”' de{aac}cor theme based on the artistic tradition of the North. It would produce 4,000 jobs.

In Chiang Rai, the low-rise mall costing approximately 1-2 billion baht would be developed close to Big C Supercenter, on 30-40 rai of land. The size of its recent project is less significant than the one that would be constructed in Khon Kaen however both have Robinson Department Store as the main commentator.

Developers Suggest Stable Flow of Financial Measures

The government should continue using measures to motivate the financial system, loosen up a few rules that avert real estate growth and determine non-performing loans (NPLs) among low-income earners, property experts recommends. The most recent measure permitting home purchasers to remove 300,000 baht of mortgage principal from taxable income has by now lifted customer sentiment in certain segments.

For example, Property Perfect Plc doubled its sales in the last half of January, recording total sales of 450 million baht in the month, 30 million over that a year ago.

Assoc Prof Manop Bongsadadt, a property expert and lecturer at Chulalongkorn University, said government measures should help develop the financial system by the second quarter of 2009.

Any extra property measures should concentrate on low-income earners as they presently are not getting many paybacks, he said.

Dr Manop added there should be preset low interest rates with longer terms. The government should also expand the leasehold period to over 30 years as residential prices for leasehold units would reduce, helping lower-income earners in addition to the market for foreign purchasers.

Chainid Ngowsirimanee, managing director of Property Perfect, said the government should have other measures to encourage the financial system, particularly the tourism industry as its contributions multiply to the entire economy.

“Low interest rates should help improve the property market. The Government Housing Bank's capital should be elevated,” he recommended.

Mr Chainid said that the government should also decrease or cancel the 30% downpayment necessity for residences priced more than 10 million baht to stimulate the upper end of the market.

He said property prices would bottom out by the middle of 2009.

Khan Prachuabmoh, the GH Bank president, said the Bank of Thailand's standard interest rate should go down to lower than 2% by June as rates in other countries are by now at rock bottom.

Mr Manop recommended developers deal with their cashflow better at the same time as small firms should look for partners or joint investments with leading developers.

Thailand’s Pace Development Bucks Movement with Luxury Condominium Opening

Pace Development, is braving the quick recession at the top end of Bangkok’s property market and has newly opened a Bt2.5 billion luxury condominium project, Saladaeng Residences.

Located in Soi Saladaeng, just off Silom Road in the centre of the capital’s business district, Saladaeng Residences presents 132 units ranging in size from 60-396 square meters. With even the nominal 1-bedroom units ranging at Bt10 million, the developers are proclaiming prices of maximum Bt300,000psm for the most pleasing units.

Pace Development CEO Sorapot Techakraisri, who was liable for the high-status Ficus Lane development that was finished in 2007, said that in spite of the market slump he considered investors will still be fascinated to housing property as it makes available higher earnings than savings or shares.

“If investors keep their money in the bank or invest in the Stock Exchange of Thailand, they will get a smaller amount of a return on investment - less than 5%. However, when they invest in property, they will obtain an asset that will produce a yearly return on investment of between 7-10%. This is superior to other investment alternatives,” he said.

Throughout two months of pre-launch sales, 30% of the project value has by now been sold, said Sorapot. The company is aiming a bulk Thai audience, with purchasers likely to be business owners, entrepreneurs and “the younger generation of influential families”, as per the company’s marketing material.

The project has got its environmental-impact-assessment (EIA) endorsement and its construction license, and has been established a Bt700 million loan from Siam City Bank. Construction is planned to be finished mid 2011.

The company plans to open another condominium project in the second half of 2009.

“We have sustained to develop our investment in 2009 for the reason that we consider that this is an excellent time to do so, when competitors are hanging up their investments,” added Sorapot. “In the meantime, we have the most excellent location for developing housing properties to match purchaser demand.”

Soi Thonglor Resists Financial Obscurity

Thonglor is starting to show up as the area of utmost competition in Bangkok for luxury condominiums.

Neighboring the 2 km stretch of Soi Thonglor (Sukhumvit 55), no lesser than 7 luxury condominiums with a united market value of approximately Bt20 billion are rising in the direction of their place in the city's skyline. And in spite of anxiety about plunging demand for condominium units in the capital's wider property market, the least-costly patches of perpendicular living in Thonglor are presently selling for Bt90,000-Bt150,000 per square meter.

Subsequent to the primary impact of the global financial recession on Thailand's property market in the final quarter of 2008, a few developers changed their product variety, choosing low-rise developments that are fast to build and deliver returns in a few months. Others, although, remained certain of abiding demand for high-rise luxury living, maintaining that location - rather than cost - would make the difference in 2009 between accomplishment and miserable sales.

Sansiri's president Srettha Thavisin said there was long-term strong demand in Thonglor regardless of prospects of only slender financial growth in 2009. In only three weeks since the starting of January, Sansiri has accomplished something in preselling units at Quattro of value almost Bt3 billion. The project's total value is approximately Bt5 billion.

Seita Hagiwara, managing director of Sikhara Kotobuki Property, a joint project between Japanese-owned Siam Kotobuki and Thai investors, said his company had determined to build its condominium project, Villa Sikhara, at Soi Thonglor 25 for the reason that the company could observe strong demand in the location, mainly from Japanese investors.

The project has by now sold 60% of its 64 units, which are priced between Bt98,000-Bt104,000 per square meter. Nearly all of its consumers are investors who are purchasing for rental reasons. The company has laid down a rental price of Bt600 per square meter for units at Villa Sikhara, making a monthly rental income of Bt45,000-Bt60,000.

Real Estate Information Centre Advises Watchfulness as Liquidity Crisis Effects Developers

Thailand’s Real Estate Information Centre (REIC) director-general Samma Kitsin is advising home purchasers to put into effect more vigilance and watchfulness as an escalating liquidity crisis could compel developers to put on hold on hand housing projects.

With credit from the banks drying up, plunging sales figures are introducing a twist on the all set resources of a number of small- and medium-sized developers, said Samma.

Demand has been going down since the last quarter of past year 2008, and commercial financial institutions are at present hesitant to make available project finance for property developers.

“We cannot articulate which small and medium property firms will experience monetary troubles when the market moves downward, although the picture will turn out to be more clearer in the final six months of 2009,” he said.

In spite of the plunge in demand, Thailand’s major listed developers will be less in danger for the reason that the majority still have a build up of presold properties big in a sufficient amount to hold up upcoming revenue levels, as per Samma.

Government Centre Catches the Attention of Residential Run

The area of northern Bangkok neighboring Rama V, Rattanathibet and Chaeng Wattana Roads is mounting in significance as a centre of housing property development as this year's notch of the new Government Centre draws closer.

Developers have launched new housing projects in the area with a shared market value of approximately Bt100 billion. Half of them are detached housing projects and the leftover are condominiums and others, springing up in expectation of strong demand for close by residential when the Government Centre opens.

Both detached housing and condominium projects in the area are not astonishingly besieged at state employees whose headquarters will change when government offices shift from various parts of the city to the new centre.

The Government Centre has also fascinated an ample move into the area by private-sector organizations. The University of the Thai Chamber of Commerce, for one, plans to launch a fresh branch in Chaeng Wattana Road close to the Pak Kret junction. Well-liked department stores and discount stores are also setting up in the area, together with Central, Tesco Lotus, Big C Supercentre, and Makro. Carrefour launched on Chaeng Wattana Road a few years back. The movement has also fascinated new bank branches.

The projects put forward an extensive range of apartments priced between Bt1.5 million-Bt20 million per unit.

Sansiri started a detached-house project known as Burasiri Ratchapreuk-Chaeng Wattana, of value Bt1.2 billion, in December 2008.

Quality Houses is building two detached housing projects on Chaeng Wattana Road of value Bt2.01 billion and Bt2.5 billion.

Property Perfect decided to build both detached houses and apartments, with an entire value of Bt4 billion, on Chaeng Wattana Road close to Pak Kret junction in 2009. This will be near to the new branch of the University of the Thai Chamber of Commerce.

Asian Property Development started The City at Rattanathibet, of value Bt1.4 billion, in December 2008.

Demand for housing units, particularly condominiums, was getting ready to grow in the Chaeng Wattana Road area, although the purchasing power of the purchasers involved would be less than those looking for residences in the central business district.