Back of a dramatic drop in tourism and fallout from the ongoing global recession which has stripped out a considerably amount of the wealth of the worlds high net worth individuals, the Cayman Island's is now looking to tax income, property and corporations. Long one of preferred offshore tax havens by those shielding income and using the favorable legal structure to create a home base for private equity and trust entities; the country is currently running at a fiscal deficit.
At a time when the OECD us working hard to shut down overseas tax havens, much of the pressure is coming from Britain who has not insisted that any lending through the Commonwealth will only be forthcoming one direct taxation is put in place. For overseas financial firms who use the country as home base back of beneficial corporate tax and company arrangements, any significant changes could well lead to a sharp decline in revenues from this. It's very much a Catch 22 situation as once the country complies and implements the conditions it will no doubt lead to a demise of the finance industry and cause the countries worsening economic situation to further erode.
Despite a flat property market in Phuket the largely domestic driven Bangkok real estate sector is seeing significant gains in Q3 which signals an upturn for the industry. Five SET (Stock Exchange of Thailand) groups accounting for 68% of all sales according to Asia Plus Securities research.
Revenue was driven by presales with the 5 companies leading the pack being Land and Houses, Sansiri, Quality Houses, Preuska and Asian Property Development. Condominiums, townhouses and single homes remain the hottest segments. Much of the buying is being spurred in anticipation tax breaks, which are set to end in December and are creating a call to action for purchasers.
Many parallels can be drawn between the enormous city specific properties of two of Asia's departed international airports with Hong Kong's Kai Tak and Bangkok's own Don Muang. Kai Tak which closed in 1998 has a land size of 320 hectares and is estimated in land value of US$ 20 to 40 billion; has remain vacant until now with the SAR Government unable to agree on a working model for redevelopment.
Don Muang which has suffered a series of openings and closings over the past few years remains very much a question mark and one that is considerably politically challenged. While Hong Kong looks to unlock the value of the land through s staged development starting with a international cruise terminal, residential housing and stadium.
Bangkok has a unique opportunity to develop a master planned mini metro with Don Muang and achieve something similar to Hong Kong, Singapore with Marina Bay and even gateway cities such as Manila and it's Fort Bonafacio redevelopment. Hopefully the opportunity to take the metropolis into the future will not be bypassed at the expense of taking a broader horizon.
In a circular by Thailand's Ministry of Natural Resources and Environment revised guidelines for EIA (Environment Impact Assessment) will come into effect at the end of December. As per leading law firm Mayer Brown JSM key revisions are on developments including marinas, condominiums and hotels and buildings.
Changes in the new guidelines for marinas require an EIA for any project with a capacity over 50 vessels or in an area of 1,000 square meters and above. For condos and hotels whereas the old specification was based on total room counts, the new rule covers both number of rooms and usable area. An EIA will be requisite for 80 rooms and over or an aggregate usable floor area of 4,000 square maters and above.
Buildings that have a height of 23 meters and upward or total usable floor area of 10,000 square meters. Location and purpose now have been expanded to cover retail and wholesale businesses, office and if the location is in the coastal area, national park, historical park or river/lake.
The new rules include a notification clause for Phuket and Pattaya, which means additional or varying rules, may be applied. Bottom line remains the permitting process while coming more in line with acceptable international standard remains subject to interpretation and somewhat discretionary under local administrations as in the case of Phuket.
As the Hong Kong and Singapore markets are well into recovery from the global financial crises foreign buyers are now seeking out deals in nearby locations where the expectation is that upside may just be around the corner.
Many Asian investors have turned their eyes on Malaysia with Kuala Lumpur receiving the lion's share of interest. Back of the successful “My Second Home” program which targeted expatriate purchasers one of the other attractive components of the market includes the ability to obtain debt.
CBD condo projects are in demand with rental yields ranging from 5-6% in strong locations while financing interest rates remain low in the mid 3% range. One thing Malaysia has been able to do versus Thailand is attract Asian nationals as purchasers due to debt, relative sophistication in legal structure and perceived stability.
While Phuket mid range housing continues to suffer from an oversupply and flat trading it becomes increasingly important to see some Government reforms in lease terms in order to provide bank financing of units. Until this time comes it puts an unhealthy emphasis of pressure on a mono market of overseas non Asian national buyers, with everyone wondering where the next go to market will come from.
Hong Kong's Consumer Council is receiving an increased number of complaints about Thai property transactions including Phuket. According to the SCMP a recent case concerned a villa purchaser who purchased a unit which included a guaranteed return of 12% for 8 years and usage of one month. The property failed to complete despite claims by the developer of bad weather and title problems.
Currently the existing ordinance does not mandate that agents who sell overseas property have an estate agents license. This policy is now under review and amendments look to be on the horizon. The Hong Kong Estate Agents Ordinance as written has rigorous requirements and clearly would see greater enforcement if this would now cover these types of transactions. The complaints this year have all been from villa buyers through the same agent.
A new record in the robust Hong Kong housing market has been set as a 5 bedroom 572 square meter Mid-Levels flat has sold for approximately THB1.8 billion. This equates to just over THB 3.2 million per square meter, which when you consider that the high end luxury villas here sell for THB 150,000-250,000 and premium Bangkok units in the region of THB 250,000 the number is astonishing. The Hong Kong press has reported that Chief Executive Donald Tsang has warned of a possible property bubble which is being fueled by Mainland Chinese buyers. So next time someone says property is expensive just have a reality check in Hong Kong.
Just concluded the inaugural AOCAP Shared Owners Conference was a resounding success with over 100 participants from more then 12 countries. With international firms such as RCI, Interval International, IFA, Marriott Vacation Club, Dial An Exchange and Absolute World in attendance. Thai firms weighed in also counting Raimon Land, Limcharoen Hughes & Glanville, Royal Phuket Marina, IndoChine, and Tawan amongst those present.
Leading keynote speaker Dr. Richard Ragatz from the US flew in to Phuket which was a leading indication on the growing importance of the sector. Plans are underway for the 2010 event that is targeting further growth.
Respected brokerage and real estate consultancy business CBRE has opened a Cambodia office in Phnom Penh last week, looking to tap into the emerging property sector. This marks the second go for the firm who has established a presence just prior to the global economic meltdown.
Falling into the Thailand and Vietnam licensed operation which Asian veterans David Simister and Mark Townsend oversee, smart money is betting that not only will the country see a spillover from the current positive market rebirth of Vietnam but also in a redirect of emerging market investment from the more established though presently politically challenged market of Thailand.
