Property Funds Present Low-Risk Alternatives

With stocks likely to remain bearish healthy into 2009, property funds stand for an eye-catching alternative for a lot of investors seeking comparatively low risk and constant returns.

Among the funds launched lately was a 3.2-billion-baht fund that embraces a 30-year lease on the five-star Centara Grand Beach Resort Samui.

Investing in a property fund permits small investors to invest in different types of properties with little capital, together with apartments, hotels and resorts, residential homes, shopping malls and also industrial estates.

One most important benefit to property funds when compared with straight investment is expediency and liquidity - a property fund keep a manager to manage the asset in response for a fixed fee.

Returns for property funds are comparable to stocks, where investors expand both in terms of dividends in addition to a capital gain - or loss - from changes in the cost of the unit trust.

Paramet Tongbua, head of equity research at Tisco Securities, said property funds put forward better security and less unpredictability than investing in a property stock.

Dividend capitulates for most property funds now vary from 8-9%, well outpacing bank deposits and coming with less danger than investing in shares of a property company, he said.

"Certain funds put forward fixed rate returns for a fixed period, subsequent to which, dividends depend on the working results," Mr Paramet said.

Although investors who subscribed to the primary offer of the fund have observed the value of CTARAF go down to just 9.25 baht per unit compared with its 10 baht par value, payable in part to investor apprehension about the health of the tourism sector.

Mr Paramet said investors should think about how market developments might influence various segments of the property market.

Mr Paramet said the Ticon Property Fund (TFUND) give the impression of being better balanced than others in the present market, as its spotlight on industrial estates meant less unpredictability than other property classes.

Property Funds Appears To Be Comparatively Safe Heaven

Property funds may be one of the most recent asset classes that can yet put forward comparatively secure returns for nervous investors over a medium-term attitude.

Wild turns in the worldwide stock markets makes equity a chancy bet at best, although valuations now seem low-priced based on most standards.

Property funds in the meantime, while exposed to a financial recession in so far as any sector, can signify a sound investment alternative bearing in mind that many present guaranteed returns for the initial years of 5% to 9%.

Somporn Burintrathikul, first executive vice-president of MFC Asset Management, said taking into account the instability in equities, bonds and supplies, property funds represents a sound option investment.

Property funds were quite untouched by short-term swings in market outlooks, he said. Returns are also generally unwavering, though investors need to think closely the personal details and assets underlying each fund.

Mr Somporn said property fund dangers can be divided into five levels. Initial one was industrial assets, like industrial estates that could observe revenues affected by a turn down in overseas investment activity. Next were retail funds, like shopping malls, also exposed to a turn down in expenditure and lease tenure with a slowdown.

Hotels and resorts were one more well-liked underlying asset however location is decisive for assessing their possibility. Likewise, funds based on marketable or residential property also required to believe demand inclinations and location.

''Each asset will be influenced in its own way by a slowdown. Each property fund also has a dissimilar structure, and investors have to think about cautiously what are the profits to unit holders, '' said Mr Somporn.

Leasehold assets especially justify close notice to the fine print. Investors should revise the fund prospectus to make out what the payment rates are for the property manager, who more regularly than not also is the property owner who initially sold the asset to the fund.

LH Chief States Slowdown Is Unavoidable

Thailand's property market is just going to slow down, regardless of a downward drift in construction costs, oil prices and interest rates, as consumer confidence is receding, says Anant, the chief of Land & Houses Plc, the country's major residential developer. He said the global economic crisis had increased concern among lenders, even healthy ones, and mortgage refusal rates would climb accordingly.

The credit crunch will also decrease demand by foreign consumers. Investments by foreign funds would vanish as investors need liquidity, he said.

In addition, he said, a few developers would find it hard to develop business by drumming property funds, warrant issues or project finance, thus only large developers would stay in the market.

''No one has said they would spread out investment in 2009,'' Mr Anant said. As a consequence, supply of fresh developments will be concentrated, the same as will be the number of lively developers.

Mr Anant said the country's financial system required to be inspired through more government investment, at the same time as the private sector should carry on investing if achievable. Most significantly, he said, the Bank of Thailand should not be concerned about price hike and should decrease interest rates so as to motivate investment.

Everybody says the country's economic essentials are excellent although we should look forward. What will come about subsequently?''

Mr Anant said the country had suffered approximately four years of political improbability and tension that had damaged the financial system. ''We have paid too much consideration to politics and every sector apparently has become of poorer quality.''

He anticipates no scrupulous show up segments in the property market in 2009. The condominium market has detonated in current years as high oil costs encouraged consumers to look for homes nearer to their workplaces in the city, however with oil prices falling quickly, condo sales could cool.

Though, Mr Anant considers that luxury property priced at 20 million baht or more would not be affected as wealthy consumers had cash and savings.