Luxury Condo Rent in Thonglor

Higher interest rates, mortgage curbs and the unknown effects of the general election are among the risk factors for the local market, says CBRE

Danish physicist and Nobel laureate Niels Bohr famously quipped that “prediction is very difficult, especially if it’s about the future”. 

However this year will bring significant changes in the Bangkok property market, slower growth in many sectors and an incoming wave of new supply, according to CBRE, the international property consultancy.

The race for increasingly rare sites is still hot with the increase in land prices and scarcity of freehold land in prime locations.

However, with new regulations on the horizon and a new Bangkok City Plan scheduled to take effect in 2020, developers are taking a step back to assess the situation.

New regulations and uncertainties

 The real estate market will face a series of challenges, including a higher policy interest rate, tighter mortgage regulations, and the need to prepare for the expected introduction of the new city plan and a land and property tax in 2020.

As well, the general election on March 24 will have an effect on the economy and the progress of infrastructure projects.

Challenges in exports and tourism

Two key economic drivers of the economy, exports and tourism, will face challenges this year.

It’s still uncertain whether US-China trade tensions will have a negative or positive impact on Thailand’s export industry.

Meanwhile, winning back Chinese tourists remains the biggest hurdle for the tourism industry since the sinking of a tour boat off Phuket that killed 47 Chinese visitors last July.

Data on arrivals during the recently concluded Chinese New Year period will be watched closely as an indicator of their sentiment towards Thailand.

CBRE believes that Bangkok’s tourism market will recover quickly from the drop in Chinese visitors, as it has shown great resiliency on many occasions in the past, even after severe political unrest.

Higher down payments cool residential market

Demand from speculative buyers and buy-to-rent investors will be lower due to high prices from high land cost, interest rates and higher down payments required by the Bank of Thailand.

These factors will make it harder to profit from rental income or to resell under-construction units. The market will focus instead on end-user buyers and clearing unsold units in completed buildings.

As domestic demand shrinks, developers will turn to foreign buyers who purchase condominium units using their own funds.

However, they cannot always be certain that these buyers will transfer units upon project completion, or about who will be living in these units.

Foreign demand is also sensitive to the economies of home countries.

High competition in upper-end condo market

CBRE is seeing many developers launching condominium projects with asking prices of above 300,000 baht per square metre, and the new norm seems to be 250,000 baht per sq m. However, there will be winners and losers.

With a lot of options for buyers to choose from, CBRE is seeing slow sales at many projects. Unsold units in completed projects are being offered at discounts to clear inventory.

New projects are not competing on price alone, as developers add other unique selling points to attract buyers. Home automation, rental management schemes and mixed-use developments are some of the selling points in the market today.

In this highly competitive market, CBRE believes that the winners will not be projects with the best room layouts or design, but those that can sell the right lifestyle at the right price.

Evolving office demand

Following the global trend, the…

A total of 454,814 residential units across the country were left unsold last year, with a total value of US$ 41 billion, according to Sopon Pornchokchai, president of the Agency for Real Estate Affairs.

The supplies in the Bangkok Metropolitan Region constituted 40% of the total units available and 55% of the total value.

These supplies included detached houses, semi-detached hoses, townhouses, shophouses, condominiums (owner-occupied apartments) and residential land subdivision catered by formal private housing developers in Thailand.

Bangkok has the largest unsold supply

The largest unsold inventory were in Bangkok with a total number of units of 91,600 units (20% of the total).  Chonburi in the east was the second with a total supplies of 34,400 units (8%) followed by Nonthaburi (32,700 units, 7%), Samut Prakan (25,300 unites, 6%) and Pathum Thani (22,600 units, 5%).

As a whole, the first five cities constitute some 45% of the total units left for sale as of end 2018  which would be entered into 2019; whereas, the Bangkok Metropolitan region (Bangkok and other five vicinity provinces) constituted 40% of the total supplies.

Considering the average price at USD 89,578, it was considered cheaper than that in Hanoi, Hochiminh City, Kuala Lumpur and Phnom Penh which were over USD 136,000.

 However, this average price would still be higher than that in Jakarta and Manila which were below USD 80,000.  Actually, there is no housing shortage in Thailand.  Most of the household can afford a house in an open market.

Sopon Pornchokchai,
President of the Agency for Real Estate Affairs

But the Bank of Thailand is concerned about the risk of weaker demand for condominiums from foreigners, Chinese buyers in particular, as the global economy slows, the central bank’s chief says.

According to central bank data, the proportion of condo ownership transfers by foreigners surged to 31% in the third quarter of last year from 27% in 2017 and 21% in the previous year. Money transfers made for condo purchases by foreigners reached 68 billion baht in the July-September quarter of 2018.

Dr.Sopon forecasted that in 2019, the supplies in the market would be down for some 10% in units or 15% in value due to there poorer state of economy, unclear political atmosphere as well as some major negative international impact such as trade war between China and USA.  Nowadays, 20% of the supplies in Bangkok were absorbed by foreign investors particularly China.  Another 15% were bought by speculators.  The real home buyers could be only 65% or two-thirds.

As global real estate markets prepare for another year in an extended cycle, the appeal of Asia Pacific’s markets remains an enduring and driving force for the industry in 2019.

North America has long been the most popular destination for institutional investor capital, especially among American and Asian investors.

However, the progressive rise in U.S. interest rates – and the prospect of more to come – are deterring some investors from expanding rapidly in the country, prompting a potential reallocation of capital towards markets in Asia Pacific.

“Transaction volumes in the APAC region were up 20 percent year-on-year to Q3 2018, with full year volumes expected to set another record,” says Nick Wilson, Director of Asia Pacific Capital Markets Research. “The growth momentum will likely slow in 2019, but we still forecast an approximately 5 percent rise in overall transaction volumes.”

Hot countries

Hong Kong and Korea experienced the strongest growth in 2018, but signs of negative sentiment in Hong Kong suggest volumes will remain flat or decline through 2019, says Wilson.

Meanwhile, foreign investor interest in Korea continues to build, as a mixture of attractive funding costs and healthier relative yields attract income seeking investors.

Investment interest in Japan has picked up, reflecting the downside risk protection the country’s safe haven status offers. However, some investors have concerns around pricing in the market.

In Singapore, the pipeline is looking healthy for next year and a number of mega-deals are expected to support transaction volume growth. By contrast, China could go either way.

Source : https://www.theinvestor.jll/news/asia-pacific/others/investors-still-hungry-for-apac-real-estate-in-2019

Developers and buyers all want to know the impact on the property market of the 197-kilometre mass transit lines under construction in Bangkok.

These new infrastructure developments, in addition to the 110km of existing mass transit lines, will improve access to and from inner city areas and link midtown areas.

This will affect the property market, especially the residential market. The popularity of each line can be seen from its ridership, as well as the number and prices of residential units along the line. These factors show not all lines are equal.

Currently, the BTS Light Green Line, with 750,000 passengers per day, has seen the most developments of residential, office, retail, and hotel properties.

It is followed by the MRT Blue Line, with 350,000 passengers per day, where developments have been concentrated along Ratchadaphisek road.

For the MRT Purple Line, many condominiums were launched during its construction with high expectations. However, with currently only 51,000 passengers per day, it will be less attractive for developers to invest further in projects along the line until the passenger numbers improve.

Residential developers are also acquiring land plots before the completion of the new lines under construction. Speculative residential property buyers are willing to purchase soon after construction starts on the lines.

End-user buyers who represent real demand only make decisions when they see there is significant progress on the lines and the projects they are planning to buy can be completed about the same time the line becomes operational. Many end users need the line to be operating before they decide to live in the property.

How mass transit moves condominium market | Bangkok Post: business

The infiltration of blockchain, the technology that supports cryptocurrencies like Bitcoin, into industries around the world is only a matter of time.

The historically traditional commercial real estate industry won’t easily escape. In its simplest form, blockchain is a distributed database.

By recording and combining transactions into a de-centralized, secure ledger system, it creates a “chain” of chronological data that no one party has control of.

The value lies in the system’s ability to authenticate and track transactions in real time without the use of a third party, such as a bank. The technology has the potential to transform the property business. The potential shake-up would significantly speed up transactions and increase transparency.

“People are brainstorming new ways of using it so that they fall on the right side of this business disruption,” according to the DBRS research report How Blockchain Technology Is Rebuilding the Commercial Real Estate Industry.

Smarter, more transparent One of the biggest impacts of Blockchain on commercial real estate would be a smoother, faster contract management process that expedites deals. With smart contracts, every part of a lease or sale agreement is automated, and payments are received instantly – even outside of business hours.

Blockchain would make it possible to “create, authenticate and audit contracts in real-time, across the world and without intervention from a middle man,” said Nick Clare, Head of Project Management, JLL UK. Smart contracts “have instructions rooted in the transaction so that payment can only be taken as long as the instructions are fulfilled, providing complete transparency to all parties and reducing the likelihood of payment disputes.”

Smart contracts

Smart contracts would also speed up pre-lease due diligence. Blockchain technology can help verify identities, making the background check process faster.

Parties involved in a contract can access it with a personal digital key, arguably reducing the likelihood of fraud. In the industrial and logistics sector particularly, Blockchain’s transparency could be of benefit to investors and occupiers alike, said Aaron Ahlburn, Director JLL Industrial Research. As corporations have expanded globally, supply chains have become longer and more complex—and the challenge of tracking inventory has become acute.

“With one-day delivery becoming the new normal, e-commerce and retail firms would benefit as the technology greatly improves the traceability of products, help bring down costs by reducing excess inventory.

Over the long term, this could add real value to the retail, logistics and distribution sectors, which are handling heavy volumes of transaction data on a daily basis,” Ahlburn said.

Liquidity For investors under pressure

Liquidity For investors under pressure to create a diversified portfolio, liquidizing assets can be difficult. Blockchain technology has the potential to ease this process if all investments are registered through the ledger, simplifying the exchange of shares between investors.

San Diego-based real estate investment and merchant bank, Silver Portal Capital LLC, made one of the first attempts to capitalise on the opportunity when they partnered with New York electronic trading and technology provider, Fundamental Interactions Inc., last year to launch Silver Portal Markets.

The blockchain-enabled primary issuance and secondary trading platform for illiquid real estate securities and properties “brings new viability to previously constrained aftermarkets by creating additional liquidity and ease of access for best-in-class real estate sponsors and issuers,” said Jon K. Haahr, Founder of Silver Portal Capital.

The secondary market will reshape the historically dislocated network…

Placemaking is based on a simple principle: if you plan cities for cars and traffic, you will get cars and traffic. If you plan for people and places, you will get people and places:  Southeast Asia, not the least Bangkok, is playing catch-up.

In a recent report, CBRE says sluggish retail sales and flat rental growth are contributing factors. Elsewhere, e-commerce—although in its infancy—is drawing millennial shoppers online. Coupled with the fact that consumers in Thailand have become more sophisticated and demanding, the traditional “bricks and mortar” shopping malls will remain stretched.

These factors have made ‘Placemaking’—like ‘Retailtainment’—a frequently-discussed topic and hot trend in the retail industry in Thailand, despite floating definitions.

Placemaking is about creating an environment that people choose or prefer to visit, and return to by incorporating and integrating several potential elements into a mall.

Thai retailers have been taking notice. So have developers, with a focus on placemaking now a genuine retail trend.

Placemaking is based on a simple principle: if you plan cities for cars and traffic, you will get cars and traffic. If you plan for people and places, you will get people and places. More traffic and greater road capacity are not the inevitable results of growth. They are products of very deliberate choices made to shape our communities to accommodate the private automobile.

One of the key elements of placemaking is the scale—the bigger, the better! Some smaller malls are declining simply because they cannot offer diversity and variety. We are now witnessing the trend of making a place a ‘destination’.

For example, Em District in Bangkok combines three shopping malls: Emporium, EmQuartier and the upcoming EmSphere. The concept is being undertaken by the same developer, using different concepts which complement one another. For convenience, all three locations are linked by a skywalk.

“Placemaking is something that makes a development quite unique and gives people reasons to go there that is different to what they can find elsewhere. It is making somewhere a recognizable landmark so that people want to live and stay there.”

The last key element happening in retail centers in Thailand is innovation and technology. Thailand’s first smart car parking system at EmQuartier is one example.

A leading coffee chain also implemented the “E-Wallet” mobile application where customers pay for their orders and collect points. The brand uses it to inform customers about new products and promotions. Many restaurants are now using tablets as a menu instead of traditional paper ones. Moreover, hi-tech IMAX theaters, digital-integrated lounges, and online booking are available for the convenience of movie lovers.

Another example is Gaysorn Group, who is combining three retail centers: Gaysorn, Gaysorn 2, and Amarin Plaza. These are to be linked by pedestrian bridges and named Gaysorn Village. Completion is expected around 2020.

Other elements which are being emphasized are experience, entertainment and excitement. New concept tenants such as Bounce Inc., an indoor trampoline park. are embracing this idea.

B2S, a local bookstore chain, has opened its first “Think Space” concept at Central EastVille with a total area of 30,000 sq. ft. as a place for new ideas, inspiration and networking.

For all its leadership moments in terms of live-work-play and multi-use developments, Bangkok still lacks the nuance of placemaking initiatives in other parts of the world, which often take into account concerns such as the number of social housing units. “In Bangkok, zoning and planning is still very broad-brush and is not micromanaged. So we’re very much driven by broad-brush approaches as to what can be…

Investors are attracted by strong occupier demand for logistics properties, and higher yields relative to other forms of traditional real estate.

In Asia Pacific, drivers of growth for logistics and warehousing space include demand from third-party logistics operators and e-commerce companies.

Direct real estate transaction volumes in the industrial sector totaled US$13.8 billion in 2016, based on data from Real Capital Analytics (RCA).

Five markets (Australia, Japan, Hong Kong, Singapore and China) accounted for over 80 per cent of industrial investment volumes regionally in the 2011-2016 period. In comparison, India and emerging Southeast Asia accounted for less than three per cent of volumes.

Logistics stock in Asia Pacific more than US and Europe combined

Growing logistics stock presents more options for investors, and enables easier entry into or exit from a market.

Based on our estimates, total amount of stock in the seven largest logistics markets in the region currently totals more than 1.5 billion sqm (gross floor area), more than the United States (795 million sqm) and Europe (260 million sqm) combined.

However, stock size varies vastly across markets as regional economies are at very different stages of development. In addition, prime facilities consists of just a small portion of the regional stock.

The definition of prime stock differs across markets because of factors such as stock availability, occupiers and investors’ requirements. But the main criteria involves newer stock (less than 10 or 20 years old), as well as larger space (cutoff point may differ) that is primarily for lease.

Australia has 29.1 million sqm of logistics space that is generally modern, but a lot of the stock in East Asia comprises of older facilities and the majority is owner-occupied. Currently, less than 5 per cent of the total stock in China and Japan consists of investment-grade facilities for lease.

Logistics stock in Asia Pacific to continue growing

More high-specification modern logistics facilities will come online over the next few years. Large logistics space for lease is growing rapidly in China and Japan.

Meanwhile, logistics real estate in India is also growing, fueled by the growth of the e-commerce sector, economic revival, implementation of the Good and Services Tax and government initiatives.

Large planned investments in road, rails, ports and airways across emerging Southeast Asia will bolster trade and warehousing demand, and consequently make more modern facilities available.

For more information, download our “Growth in logistics sector luring investors in Asia Pacific” report today.

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With growth in its core real estate business tied to the country’s economic growth, the company is targeting a larger international presence and a bigger lifestyle play to fulfil its ambitions of becoming a global brand.

“We looked for partners that can help Sansiri grow further, partners that we could learn from in terms of hospitality, lifestyle, technology, innovation, and even in terms of new target audience,” says Sansiri president Srettha Thavisin.

“Importantly, all six investments are in high-growth sectors in global markets which offer new sources of revenue beyond Thailand.”

Of the announced $80-million investment, around $58 million will go towards US-based boutique hotel chain Standard International and its mobile booking application, One Night. The remaining is earmarked for Tyler Brûlé’s lifestyle magazine Monocle, London’s Airbnb management firm Hostmaker, Asia’s co-working space JustCo and smart indoor farm technology firm Farmshelf.

Do these investments mean a shift away from real estate for the Thai realty firm?

Thavisin says Sansiri’s core business over the next five years will continue to be property development but the firm has realised it needs to meet evolving consumer needs by creating a world-class modern living platform.

“Our next step is to provide end-to-end solutions, the total package of next-generation living. That is why we chose to invest in these lifestyle companies; each brings another piece to the puzzle of complete living. It is a natural extension of our property development business,” he added.

Some of these end-to-end solutions that Sansiri plans to launch with its new portfolio companies are already taking shape. Farmshelf, which provides smart indoor farms, is working to integrate its products into Sansiri’s selective residential projects. Similarly, media brand Monocle and the property developer plan to launch a mixed-use residential concept in Bangkok in 2018.

Sansiri also plans to help Hostmaker, which currently operates in London, Rome, Paris and Barcelona, expand to Asia over the next few years. Similar expansion plans are in the offing for the One Night app that targets same-day stays in handpicked hotels…

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