The Asian real estate investment market continued to gain momentum in the third quarter of 2009, according to research from CB Richard Ellis (Thailand) released today.

Cash rich domestic buyers continued to underpin investment activity, while foreign investors gradually emerged from a quiet first half year to look for medium- to long-term investments.

Direct real estate investment in Asia, excluding land transactions, jumped 25 per cent quarter-on-quarter to an estimated US$9.1 billion. Hong Kong accounted for the largest portion of capital at US$3.2 billion, or 36 per cent of the total volume, followed by China, South Korea and Taiwan, which accounted for 18 per cent, 14 per cent and 12 per cent respectively. However, overall transaction volume remained low in the first nine months of 2009, falling by 49 per cent year-on-year.

The third quarter saw foreign investors become more active in the region, with cross border investment jumping from a low of 6 per cent and 9 per cent of total volume in the first and second quarter respectively, to a high of 21 per cent. The amount of non-Asian capital accounted for just 9 per cent of total cross-border transaction volume, while more than 90 per cent came from within Asia.

Despite the quarter-on-quarter improvement in cross-border investment activity, overall foreign investment in the region remained limited in the first nine months of 2009, falling by 70 per cent over the corresponding period in 2008.

Investment in the Bangkok real estate investment market continued to focus on condominium projects in the third quarter, with domestic players driving demand. Sales exceeded expectations as demand for residential projects began to recover. Large, well-capitalised and listed companies launched a series of new projects but small and mid-sized companies found it hard to raise finance.

Notable transactions completed during the third quarter included major acquisitions by Bliss-Tel Public Co. Ltd and Bangkok Broadcasting & Television Co. Ltd. Bliss-Tell paid around US$4.6 million to AngKet Holding Co. Ltd for 250 units in the AngKet condominium project in Pattaya, while Bangkok Broadcasting & Television Co. Ltd spent around US$3.7 million to acquire 28 units at Star Estate @ Rama III from Eastern Star Real Estate Public Co. Ltd. Both transactions involved developers clearing unsold inventory from recently completed buildings.

Although the real estate sector generally remained quiet, three new property funds were listed on the Stock Exchange of Thailand during the third quarter. They were the MFCStrategic Storage Fund (M-STOR), Sala @ Sathorn Property Fund (SSPF) and 101 Montri Storage Property Fund (MONTRI). The three funds had a market capitalisation at IPO of approximately THB2.88 billion. These funds were trading at a level where investors can obtain yields as high as 11.68 per cent per annum. Fund managers are planning to list a further series of new property funds over the next 12 months.

SOURCE: Property Report

The Thai government will push for cabinet approval of a new land and buildings tax, according to Finance Minister Korn Chatikavanij.

The new tax is set to impose an annual charge on land assets and property throughout the Kingdom, with local administrations being given the ability to set flexible rates based on individual priorities and needs.

Rates are also expected to vary depending on how the property is utilised, such as whether it is being used for agricultural, residential or commercial activities.

Currently 90 per cent of tax revenues come from income taxes. The Ministry expects the new tax will help to expand the tax base and improve social justice.

SOURCE: Property Report

Industrial Buildings Corporation Ltd is optimistic the Thai property sector will experience a full recovery by the end of 2010.

Market sentiment has improved since early this year when the Israeli company and its Thai partner, Pace Development, formed a joint venture to construct the Bt14 billion MahaNakorn project.

Chief executive Dalit Braun told The Bangkok Post: “IBC entered the project for the long-term. During our entrance, the world was in the middle of a financial crisis but we insisted on investing in Thailand. We have an optimistic outlook on the Thai property market in the long run.”

MahaNakorn is a luxury project on a 15-rai site near Chong Nonsi BTS station in Bangkok. It has 194 condominium units priced at 280,000 baht per square metre. Around 20 of the units, worth a combined Bt200 million, have been sold to date. A further 5 units are expected to be sold before the sales gallery opens in February 2010.

Source: Property-Report

As prices of luxury condominiums in Bangkok’s central business district (CBD) have gone up dramatically over the past six years, there has been continued interest from buyers looking for more affordable units in older buildings in the area.

However, according to Jones Lang LaSalle, there are several factors that buyers need to consider when buying used luxury condominium units as divestment under the current market condition – where the levels of both old and new supply are high – can pose a big challenge.

“We have seen continued interest in used luxury condominiums offering relatively attractive prices, particularly in well-managed buildings. Some of these condominiums may be offered at prices as low as half of those commanded by units in newly completed buildings or under construction projects,” said Daonum Lilavivat, head of Residential Agency at Jones Lang LaSalle.

Findings from Jones Lang LaSalle’s recent market study indicate that newly completed or currently under construction luxury condominium units in Bangkok’s CBD are now offered for sale at prices ranging between Bt110,000 and Bt200,000 per sqm, whereas units in older luxury buildings (aged ten years and older) in the same area are available for sale at between Bt55,000 and Bt90,000 per sqm.

“Discussions with our customers who purchased condominiums in older buildings show that aside from lower prices, most of the older buildings in the luxury segment offer relatively larger common space and full recreational facilities. These amenities include large swimming pools, fitness/sauna rooms and tennis courts, which are not typically provided in many new condominium projects. In addition, some buyers prefer the more ‘cozy’ environment offered by older condominium buildings rather than the ‘hotel-like’ atmosphere in new buildings,” says Daonum.

Good time to buy for own occupation
Buying used luxury condominiums in the CBD for own occupation now is a sound decision, says Daonum. “The strong competition in the leasing market due to the rapid growth of new condominium supply has put downward pressure on rents. Many owners who bought condominiums for investment purposes many years ago may now find it difficult to let their units as most tenants prefer newer buildings. For this reason, these investors are keen to divest their holdings,”

She adds that many of these units offer attractive prices and good value for money for those who are looking to buy used condominiums for their own occupation.

Daonum’s view is supported by Jones Lang LaSalle’s new market study which provides an analysis of gross and net yields in the high-end Bangkok condominium market.

Dan Tantisunthorn, head of Research at Jones Lang LaSalle, says “In a study to be published shortly, we found that the average resale price and current borrowing rates have adjusted to a level resulting in a gross yield which would attract end-user buyers. At these same price levels and assuming no vacancy, investors can earn a net yield above long term ‘risk-free’ rates, despite the yield on some of these, such as the recent government bond issue, rising.”

Doanum believes buyers can expect a capital appreciation in the long term as there are less sites/land plots available for new developments, whilst development costs of future projects are likely to rise.

Nonetheless, investors looking to buy used units to let at this time must be very cautious, says Daonum. “Aside from the downward pressure on rents because of strong competition and tenants’ preference for newer buildings, an investor may also have to make a big cash outlay to renovate a unit prior to putting it up for rent.”

Quality of property management – a key factor to look at
Because of old age, the condition of some condominium buildings can deteriorate – so can their asset values. Therefore, apart from price and location, the quality of building/property management is another key factor that buyers must pay a lot of attention to.

“There are a number of older luxury condominium buildings that are well managed and have always been kept in a like-new condition. Units in these buildings are able to sustain their asset value despite the high levels of supply entering the market over the past few years, and have a higher potential to enjoy a capital appreciation once the market picks up,” says Daonum.

“The attitude of the condominium juristic person committee plays a vital role in determining how the building is managed. A committee with a forward-thinking outlook will not be reluctant to invest in property management, including the regular maintenance and improvement of common areas, communal facilities and all systems within the building,” Daonum says.

SOURCE: Property-report.com