Thailand's next-door neighbor Malaysia has foreign investors registering increasing concern over the current political issues facing the country.
With the coalition Government of Prime Minister Najib Razak coming under pressure back of recent racial tension between the majority Muslim and Malay population and ethnic Chinese and Indian there remains questions if peace can be maintained.
The country is registering high on the radar of many political and risk management analysts who voice out opinions that international investment will be hit hard including the property and real estate sectors unless the current groundswell of sentiment can be neutralized.
While Thailand and the upcoming landmark Supreme Court ruling on the assets of deposed Prime Minister Thaksin Shinawatra had been touted as one of the regional hot spots, Malaysia is now moving increasingly into the limelight.
Thai based Astudo's X2 Residences brand successfully debuted its sales launch at a high profile event in Bangkok recently. For the 15 purchasers a value add Mini Cooper automobile was given free as an incentive to purchase. Back of a lifestyle investment model product locations include Koh Samui, Koh Kood and Hua Hin (Kua Buri).
Configurations of units include one-bedroom apartments and one to three bedroom pool villas, with prices starting at just over THB 4 million up to nearly THB 45 million. Financing of up to 80% of the purchase is a key selling point with either leasehold or freehold options. A guaranteed return of 5% for 5 years is aimed at spurring sales.
Koh Samui sits on a 3 rai site with 10 pool villas, and has been designed by international firm SLA (Steven Leach and Associates). Koh Kood occupies 6 rai with 9 apartments and 16 pool villas with design also by SLA. While Hua Hin (Kua Buri) is placed on 6 rai with 25 pool villas.
Well-known Thai architect Duangrit Bunnag has designed this project. Both Koh Samui and Hua Hin are adjacent to existing X2 managed resorts.
For those of you looking to move investments into property the rule of thumb remains timing is not everything, it's the only thing. Buy low and sell high is often best done by recognizing what markets are doing to develop on strong demand characteristics. Here are some of our new top emerging locations –
1.Koh Sirey
Some say Koh Sirey, others Koh Siray, but for many fulltime Phuket residents the name often draws a quizzical look and the question “where?” Home to the new Westin Siray Bay Resort opening in Q1 2010, there are also too more large international class hotels currently in planning in the island. With bridge access to Phuket and stunning views up and down Phang Nga bay, expect property developers to hit this market soon.
2.Khao Lak
With over 5,000 hotel rooms, kilometer of white sand beaches and less than two hours driving time from most of Phuket it remains a mystery why there is not a larger property market in Khao Lak. With beachfront land trading in the range of THB 5-15 million per rai depending on the location, substantial pieces remain available especially going north past Le Meridien. We've seen Ko Pilai just over the bridge boom so it's just a matter of time for our northern neighbor.
3.Khanom
Again it's all about beachfront land and that where property buyers see the multipliers of capital appreciation. Located near two airports being south of Surat Thani and North of Nakhon Si Thammarat, with the major Thailand north south highway nearby. Major stretches of long beaches and great natural beauty along with views into the gulf of Thailand resort developers are already leading the land rush in this up and coming location.
4.Koh Rong Archipelago Cambodia
Accessed through the southern gateway of Sihanoukville, with proximity to Thailand and a strategic location near to markets such as Singapore, Bangkok, Hong Kong and Vietnam this tropical paradise has nowhere to go but up. The recent launch of Song Saa Resort saw a flurry of interest and with its favorable weather, ability to attract travelers from Siem Reap and current reforms in ownership laws the property market here is gearing up.
5.Ari (Bangkok)
Slated to be the next Thongor with direct access from the BTS Skytrain, property prices remain considerably lower it's more famous counterpart. With a fashionable community mall located next to the BTS, and artsy crowd flocking here, this looks to be a smart buy for the future and is just 5 stops away from the hub of Siam Station.
The Thai real estate sector is likely to see a major initiative by Thai developers who aim to offer direct mortgages. Back of the Financial Institutions Act 2008, loans can be made though not with publically raised funding.
A number of Thai listed firms are meeting with the Secondary Mortgage Corporate (SMC) to coordinate with financial institutions and look at securities rights issues to cover funding. SMC requires THB 300 million for firms listed on the Stock Exchange of Thailand (SET) while only THB 20 million for those who are privately owned or on the Market for Alternative Investments (MAI).
Property in the band of half a million THB up to ten million has been earmarked. The shift in developers moving into the mortgage business looks to propel the industry into unknown territory with some concern by industry experts on possible risk with smaller non listed firms operating in this space.
It's the first day of the New Year and we can't help but be optimistic about the coming year ahead. Here's a few inside tips on what we view as strong prospects in the year ahead –
1.Kata Rocks
Oceanfront real estate, stunning aspect, west coast views all looks to be a major winner. Buy on strong fundamentals and this one has those.
2.Mandala Condominiums
These developers took a major initiative and built the project prior to going to market. Now nearly complete and ready to move in, Bangtao central and a close walk to the beach in these supersized pool condo units.
3.Andara Residences
Just a few units remaining in this mixed use hotel managed project by Allan Zeman. The adjoining villas have seen resale transactions and appreciation up over 100%, while this may not happen for the condos, there are strong fundamentals at play for excellent yields and good capital appreciation.
4.Malaiwana Luxury Apartments
With a beach club in the works and super villas now completing, we've heard this might be coming to market in 2010. Stay tuned and on the lookout as Nai Thon is poised for international hotels and is one of Phuket's best addresses for the future.
5.Mal Khao and Thalang Land
Both areas are set for large scale development with Mai Khao seeing more hotels and now the new Convention Center. Thalang near to Phuket International Academy (PIA) is seeing pricing move up fast, if BIS (British International School) was an example this is a great place for longer term investment.
On the final day of the year let's take a quick glance back at what story's made the headline and created a buzz with buyers, developers and agents –
1.Resales
Back of the GFC (global financial crises) which amplified buyer's risk concerns resales became a major segment in resort grade real estate this year and is the dominant storyline for the year that many property developers can't wait to end.
2.Villa Rentals
As more completed product became available both supply and demand saw substantial increases during the year. The number of dedicated web sites grew steadily, agents shifted business models to attract revenue and international hotel brands supplied management.
3.Shared Ownership
Fractional ownership became an industry talking point back of the launch of yooPhuket and the highly publicized Absolute group's vacation ownership projects. Going into a new decade this sector clearly is set to grow.
4.Hotel Branded Developments
This trend has continued to remain hot despite the cooling off of the broader market. A number of new mixed use projects are in the pipeline which will most likely see the light of day in 2010.
5.Launchless
For the first time in many years there was profound restraint in new project launches. With the number of significant products debuting, which could arguably be counted in one hand, the sideline remains currently crowed with standing room only for developers who remain gun-shy.
In spite of the recent injection by good neighbor Abu Dhabi who provided Dubai with an early Christmas present of US$10 billion to help cover the US$4.1 billion bond of Nakheel property the fact remains there are inherent fundamentals gone haywire.
Aggressive Nakheel is currently underwater (i.e. one of our more favorite real estate terms meaning a property asset has more debt then the value of the asset) continues to be a long term issue. It's doubtful even the late Jacque Cousteau could find a quick solution to this; so certainly one of 2010's most interesting financial stories will be the Middle East power struggle and perhaps even a Great Dubai Sale of international assets.
Phuket's luxury property market saw transactions worth THB 1.1 billion for the period of July through November 2009 according to market research by leading Thai consulting firm C9 Hotelworks. A growing resale sector accounted for 50% of the sales.
According to Bill Barnett Managing Director of C9 “this year has seen the absence of new high end product which has propelled the secondary segment, while off plan product remains sluggish.”
Adding further that “the failure to launch new projects is a key constraining factor limiting volume in the marketplace. Despite demonstrated sales of a number of 'super' high end villas from THB 165 – 330 million; developers remain on the sideline more out of negative risk concern then fundamentals.”
Market data pinpoints that a growing number of early purchasers in developments are now cashing out at substantial profit levels thus pushing up pricing points for existing product. Geographically Kamala's Millionaires Mile has experienced the highest level of activity.
Without significant new product entering the supply steam, the second half of 2009 has seen a growing number of premium ocean view lots transacted with buyers set to develop their own luxury residences.
Bill Barnett commented “traditionally the period of December to April remains peak sales season, and feedback in the past few weeks has seen sales traction. Ultimately the market desperately requires new launches to stimulate broader interest if there is to be a return to stabilized trading.”
Shades of Wham here but in what is no doubt one of the most controversial legislations before the Thai Government looks to be an uphill battle for both approval and then implementation. The Finance Ministry's draft policy has already been submitted and is widely thought to have a chance to pass into law next year.
A ramp up period has been estimated by many to be in excess of 24 months once approval has been granted and implementing guidelines issued. At the heart of the controversy is the tax system which would target large and wealthy landowners of undeveloped land. There remain many issues such as the basis of valuation and appraisals, low income exemptions and agricultural property.
Though the tax will increase collections by billions of baht there continue to be many special interest groups and factions which oppose the draft either in part or principal. This looks set to be an ongoing developing story.
