Source: The Nation

With an eye on generating more rental income over the next five years, Major Development is shaping up plans to build hotels this year. The move will help create a stable source of income for the company, managing director Suriya Poolvoralaks said.

Major Development is developing a boutique hotel at Hua Hin. It is also scanning land in Pattaya for launching luxury-hotel projects by 2010.

The company is also developing nine residential projects worth Bt20 billion in Bangkok, Pattaya and Hua Hin. It has six luxury-condominium projects in Bangkok - Watermark Chao Phya River, Manhattan Chidlom, Aguston Sukhumvit 22, Wind Sukhumvit, Wind Ratchayothin and Royce Private Residences.

Royce Private Residences is being developed by MJAI Development, which is a joint venture between Major Development and AIG Asian Real Estate Partner II.

The next two projects are Mykonos Hua Hin and Marrakesh Hua Hin Residences. The last one, Reflection Jomtien Beach, is in Pattaya. The three projects have been launched this year and are worth Bt3 billion each.

Major Development plans to build a hotel close to the Marrakesh Hua Hin Residences, Suriya said.

Feasibility surveys are also being carried out on 10 rai of land close to Reflection Jomtien Beach in Pattaya for developing
hotels.

The hotel and residential projects illustrate the company’s thrust on the luxury market, Suriya said. The company is focusing on high-end and high-rise condominium projects, for which it sees a strong demand in the market.

Major Development plans to launch three to four condominium projects a year. New projects may be launched in the second half if the uncertainty over the country’s political future clears up, Suriya said.

“We will have to see the country’s economic and political climate in the second half. If things clear up, we may launch new
projects,” he said. “As far as possible, we will invest in the projects ourselves. But we are open to joint ventures.”

In April, the company’s shareholders approved issuing of debentures or convertible debentures worth Bt1.5 billion that will help the company raise funds from the market if the need arises, he said.

Major Development posted a revenue of Bt614.52 million and net profit of Bt117.27 million in the first quarter, up 65 per cent and 149 per cent from the same period last year.

Major Developer plans upmarket hotels, residences, in Hua Hin and Pattaya by 2010

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Source: Bangkok Post

Demand expected to pick up in Q4

CP Land Co Ltd, expecting single-housing demand to revive by the fourth quarter of the year, plans to launch a project with unit prices starting at 2.5 million baht in Min Buri, according to executive vice-president Somkiat Ruentongdee.

The company will also be able to gain an advantage over some rivals who will have to follow new city planning regulations introduced over the past two years. The old regulations allowed for housing lots from 50 square wah.

“We obtained a construction permit before the new city planning [regulation] was effective. So new projects seeking construction permits can be developed for units sized from at least 100 square wah,” said Mr Somkiat.

As well, the company expects the site to appeal to buyers because the planned Pink Line mass-transit route would pass nearby.

The project will occupy a 70-rai site and have 275 single houses. Formerly named CP Home Park, the project would have a new name under CP Land, he said.

It will also launch the CP City Home project worth 700 million baht on a 69-rai site in the southern province of Nakhon Si Thammarat, with 320 units priced from 1.9 million baht.

The company also has a condominium, The Seasons in the Srinakarin area of eastern Bangkok and worth 700 million baht, which is 50% sold.

CP Land is looking for plot sized from three to four rai to develop a condominium near a convenient transit route, and another plot of one to two rai in the central business district.

The company yesterday introduced a new subsidiary CPMQ, a joint venture with CP Group subsidiary Magnolias Quality Development Corporation (MQDC). Its first project will be The Chur condominium on a 29-rai site near the Tesco Lotus store in Pattaya. Worth two billion baht, it would have six seven-storey six buildings with a total of 792 units sized from 44 to 144 sq metres and priced 46,500 baht each.

The project will be launched on June 28 with one-price marketing. Construction with an investment of 1.1 billion baht would start in October. The company hopes to achieve one billion baht in sales by the end of the year and the rest in 2009.

Mr Somkiat said the subsidiary would start booking revenue next year of around two billion baht. To maintain revenue, the subsidiary would develop three projects in 2009 while CP Land would develop at least four to five projects worth four billion to five billion baht per year.

For the Pattaya project, CP Land had strong network and customer database with potential to buy units.

Currently, CP Land has a total of around 4,500 rai in hand - 3,200 rai in industrial estates in Rayong and 100 rai in the Greater Bangkok. It aims to have a 50:50 ratio of revenue from sales and recurring income in the next few years, compared with the current 30:70 breakdown.

CP Land to launch B2.5m single houses

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Source: The Nation

New Act puts tighter controls on escrow transactions

The Escrow Act of 2008 came into effect on May 21, establishing laws governing the escrow business in Thailand.

In an agreement to purchase and to sell immovable property, or any such reciprocal contract, one party will have an obligation to transfer or deliver assets or documents to another party and the other party will be obligated to pay the first party. In order to ensure that the obligations of both parties are fulfilled, the parties may mutually agree to appoint an escrow agent. This involves a tri-party written agreement known as the escrow agreement.

The escrow agent has the duty to ensure that the parties fulfil their obligations under both the contract and the escrow agreement. The escrow agent will also be responsible for the safekeeping of any money, assets or documents deposited by the parties and for handing over the money or arranging the transfer of ownership or rights to the assets when required.

As well as providing general definitions and outlining the main features of an escrow agreement, the Act lists the conditions and requirements for engaging in the escrow business, the rights and duties of the parties to an escrow agreement and those of an escrow agent, and the powers of the Escrow Committee. It also prescribes penalties for non-compliance.

One of the requirements is that companies wishing to engage in the escrow business must obtain a licence from the Finance Ministry. The Act will not affect existing escrow agreements, but if existing escrow agents wish to continue to carry on their business under the new Act, they are required to apply for a licence within 90 days of the Act taking effect.

The escrow business under the Act is a juristic person. The term “escrow agent” is defined as a juristic person whose creditworthiness has been approved by the Escrow Committee, which acts as a middleman.

Only a financial institution, or other juristic persons as specified under a ministerial regulation, will be permitted to act as an escrow agent. Further, the escrow agent must have no conflicts of interest with either party to the contract, and must obtain a licence to conduct the escrow business from the finance minister.

Escrow agents will be monitored by the Escrow Committee, which has the authority to order them to correct or stop prohibited activities if they are detected and to perform their duties in compliance with the Act. If an escrow agent does not comply with an order of the committee or with certain sections of the Act, the committee will have the authority to impose an administrative fine on the agent. The Act also prescribes criminal penalties for escrow agents committing fraud. The fines and penalties will also apply to the managing director or authorised representative of the escrow agent - unless they can prove their innocence or demonstrate that they exercised sufficient duty of care.

Kanitnoy Praneechit is a senior manager of legal services at PricewaterhouseCoopers Mekong.

Thailand’s new Escrow Act in effect

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By Somluck Srimalee/The Nation

Province is seeing strong demand from Scandinavian home-buyers

Land prices in Rayong province, especially at Mae Pim beach, have shot up 60 per cent from an average of Bt8 million per rai in the last two years to Bt13 million per rai, given the strong demand for residential projects from foreigners.

Vilailux Development’s general manager Teeravat Pipatdhitakul said demand for residential projects in Rayong province, especially for Mae Pim beach locales, has risen since last year due to foreign as well as domestic investors showing interest in buying second homes.

Scandinavian investors have shown particular interest in the Rayong province as have Britons, Germans and Americans.

Given such strong demand for residential projects, six property developers - domestic as well as from overseas - have launched their residential projects on Mae Pim beach and Ban Pae with a cumulative worth of about Bt10 billion. They include

Glen Asia, developer of Tropical Beach Resort and Residence at Ban Pae - a project worth about Bt3 billion; Logan Residence Development with Seaview Condominium on Mae Pim beach; and Phupatara by Vilailux Development - a project worth Bt2.2 billion.

Other domestic companies are also developing residential projects worth about Bt2 billion.

According to research by Colliers International Thailand, Rayong is popular with foreign investors, especially Scandinavians.

As a result, a number of property developers from Scandinavian countries, especially Sweden, have invested in developing residential projects in the province.

The research shows that Scandinavian companies have established joint ventures in Rayong province. The cumulative registered capital of 39 such companies stands at Bt132.33 million. The highest registered capital comes from Norway at about Bt40.80 million.

The first project, launched by a Swedish investor back in 2003 - initially intended as a member estate for retirees - paved the way for the Scandinavian property developers’ rapid expansion in Thailand.

Of units developed by Scandinavians all across Thailand, Rayong has seen the highest number with 809 residential units, followed by Hua Hin and Pattaya, with 468 and 259 units, respectively.

The strong demand for residential projects in Rayong has driven up resale prices 12 per cent to 20 per cent a year.

Teeravat said Vilailux was selling its residential projects at prices between Bt80,000 and Bt100,000 per square metre in October last year.

However, given the strong demand, the same locations now command prices between Bt90,000 and Bt120,000 per square metre.

“Prices for Rayong projects are expected to grow because prices here have always been lower than in Hua Hin and Pattaya. We believe that as developers invest in Rayong luxury-residential projects, this market will change middle to upper within the next two to three years,” Teeravat said.

Foreign investors drive up prices in Rayong

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Source: Bangkok Post

Vilailux Development Co, the property arm of the Vilailuck family, plans to invest more in Rayong in line with the province’s increasing potential, says president Watchai Vilailuck.

The company was in talks to buy a 20-rai plot next to its Phuphatara resort and hotel on Mae Pim Beach in Rayong with a land price of 10 million baht per rai. “We don’t hesitate to acquire it as we want to close sales of Phuphatara,” said Mr Watchai, who is also the president of Samart Corp.

Vilailux Development aims to achieve a 90% sales rate at Phuphatara by the end of the year. The 58-rai site on Mae Pim Beach currently has residential presales of 1.2 billion baht. Construction of the first two condominium buildings is 70% completed.

With a total value of 2.7 billion baht, the site will have a 205-room hotel, 33 villas and 199 condominium units with prices starting at 3.8 million baht.

Phanom Kanjanathiemthao, managing director of the property consultant Knight Frank Chartered (Thailand), said the number of tourist arrivals to Rayong rose from 40,000 per year in 2005-06 to 100,000 in 2007. “Most of them [tourists] shifted from Khao Lak after the tsunami. Some of them wanted to escape from congestion in Hua Hin, Pattaya and Phuket. So Rayong has become their alternative,” he said.

At the same time, an increasing number of property investors are interested in Rayong as prices are lower than in other tourist destinations. Since land costs in Hua Hin are higher, investors are looking at other destinations close to Bangkok, such as Rayong.

Mr Phanom said land prices in Rayong had risen by 20-30% during the past year and beachfront plots were priced at 10 million baht per rai.

“There are no more beachfront land plots for new development in Hua Hin while land and residential prices have gone up greatly,” he said, adding that condo prices in Hua Hin were now 120,000 baht per square metre compared with 40,000 to 60,000 baht in Rayong.

Vilailux will invest more in Rayong

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Source: Bangkok Post

Major Development Plc (MJD) is riding the growth wave of the Pattaya property market with a plan for a luxury condominium worth 3.3 billion baht, says managing director Suriya Poolvoralaks. He said as much as one-third of the country’s real estate investment was now in the Eastern Seaboard.

Each year more than four million tourists from around the world visit Pattaya, bringing in at least seven billion baht.

The number of tourist arrivals to the area rose 14% in 2006 and 10% per year on average since 2000.'’Property projects in Pattaya have shifted from the low to middle-end segment to more luxury,'’ he said. Average condominium unit prices have risen from a range of 28,000 to 60,000 baht per square metre to 89,000 baht and are expected to rise another 3-5% by the end of 2008.

The Reflection condominium would be located on a 10-rai site, with two high-rise buildings with a total of 432 sea-view units. Unit prices are 5-10 million baht or 80,000 to 200,000 baht per sq m. Bank of Ayudhya would finance 50% of the two-billion-baht project.

After one month of marketing, the company had sold 40% of the units _ 24% to foreigners and 16% Thais, said Mr Suriya.

During the first five months of this year, MJD recorded 2.5 billion baht in sales, up 30% from the same period last year. As at the end of the first quarter, it had a sales backlog of 4.8 billion baht, half of which would be realised this year.

MJD recorded a first-quarter net profit of 107.54 million baht, up 149% from the same period last year, on sales of 610 million, up 65%. Its gross margin rose to 33.75% from 33.32%.

MJD shares closed yesterday on the Stock Exchange of Thailand at 4.10 baht, up two satang, in trade worth 2.22 million baht.

MJD cashing in on Pattaya property

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Source: The Nation

Rising prices of beachfront locations prompt developers to avoid ocean views

Pattaya’s Songkran festival, which ended last week, is a good indicator of just how rich this beach town has become because of the hotel and condominium boom.

Sukhumvit Highway, the main artery feeding Pattaya, was jammed with traffic all day and night. However, the town can now afford to turn away tourists during the weeklong event.

Pattaya’s real-estate sector is flush with cash as more projects flood a market that is already swamped with supply. A number of new sites were launched recently - some offer big discounts while others are taking advantage of the boom.

There is also a sharp difference between the offerings of the new sites and the older ones.

The move today is toward the inland areas that were once shunned by developers since they do not have ocean views. Some beachfront land costs more than Bt12 million a rai, which is too steep for most builders.

Many developments, such as Urban Pattaya and Avenue Residences, are built away - not just a few metres but entire blocks away - from the beachfront.

Some do not afford sea views at all as beachfront land has become so scarce and expensive that it no longer draws interest from many builders.

Urban Pattaya, for example, is a 2-rai, 45-square-metre project between Beach Road 2 and Beach Road 3.

Its two towers, eight floors each, to be completed next year, will have 158 units, priced at Bt58,000 a square metre, equivalent to many mid-range Bangkok projects.

The developer is confident of meeting the construction schedule as it does not need to wait for an Environmental Impact Assessment (EIA) approval. Like many astute builders, it has split the project into two, each containing 79 units.

According to the law, estates with less than 80 units need not obtain EIA approval. Buyers should therefore not fear long delays.

Since most of Urban’s one-bedroom units are booked, it is now selling two-bedroom apartments spread across 78 square metres with a starting price of Bt4.6 million.

The move toward inland condominiums started some time ago. Pattaya City Resort on South Pattaya Road near the Sukhumvit Highway junction, was one of the first high-end projects that saw no need to take up a beachfront location two years ago.

Pattaya projects move inland

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Source: The Nation

An influx of money from developers has spurred demand on the island

Land prices in Koh Samui are expected to rise between 20 per cent and 30 per cent a year as a number of property firms expand their investment in sectors such as retail, residential-project developments, hotels and resorts, Thailand Estates Corporation (TEC)’s chief executive Chaiyagarn Sudamphanthorn said.

TEC is a local property developer on the island.

He said land prices in Koh Samui have risen from Bt10 million per rai in 2003 to Bt60 million per rai this year for land designated for retail and commercial use.

Meanwhile, price of land designated for residential projects and located close to the beach is now between Bt15 million and Bt25 million per rai.

Land located on the hills is available for Bt5 million to Bt15 million per rai.

Chaiyagarn said demand for land in Koh Samui registered strong growth after a number of retail companies invested in the island.

These companies include Siam Makro, Tesco Lotus and Big C.

A number of luxury hotel-and-resort companies have also grown their investment in the island.

According to research by international property agency Colliers International Thailand, about 12 luxury hotels are under construction and are expected to start operations between this year and 2011.

The cumulative value of the hotel projects is Bt30 billion.

These projects include Santiburi Residence, Conrad Koh Samui Resort & Spa, W Retreat & Residence, Dusit Resort Samui, Banyan Tree Koh Samui, Intercontinental Resort Samui, Park Hyatt Koh Samui, Vana Belle Luxury Collection Samui, X2 Resort Samui, Ibis Samui, IMM and The Sarann.

Given the strong demand for real estate in Koh Samui, Chaiyagarn estimates that land, especially stretches close to the beach and commercial areas, will touch Bt100 million per rai by 2011.

Sinthoranee Property’s managing director Wuttichai Phaoenchoke, who recently expanded his business in Koh Samui and has developed a residential project under The Sea brand, said the company has invested in the island because it believes that demand for residential projects, especially from foreign investors, has strong potential.

The company also plans to launch a new resort development in Koh Samui this year.

Koh Samui land prices take off

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Source: Bangkok Post/Nigel Cornick

Over the past three years, Thailand’s resort areas have rapidly progressed as desirable destinations for upmarket real estate investors.

The tourism industry has opened the eyes of many buyers and the Kingdom has clearly established itself as a place where people want to reside, in terms of affordability, lifestyle and cost of living.

There are not really any negatives except one, and it relates to foreign ownership.

Regulations currently limit foreign freehold to 49% of the saleable area in a condominium, and because of this, the industry is being held back by as much as four times its growth potential.

Last year, Raimon Land sold four billion baht worth of resort real estate, but it could have sold almost double that if there were no restrictions.

Relaxing the quota to 70% or more would provide a major upside for the industry. If we had the ability to guarantee foreign ownership, the market would expand significantly, as there is no doubt that the demand is there.

It is frustrating, not only for the real estate industry, but for the prosperity of the country as a whole, as the opportunity to attract more overseas investment is huge.

Of the destinations hardest hit by the regulations outlined in the Foreign Business Act, Phuket and Koh Samui stand out. They rely on overseas investors, as Thai buyers show limited interest.

Thai nationals typically prefer to buy in Hua Hin and increasingly in Pattaya, although there are indications that this is slowly changing in Phuket where attractive capital gains and rental yields are being realised.

Overseas investors on the other hand, are driven more by lifestyle imperatives. They are seeking a pleasant retirement location or a second home; investment yields are often a secondary concern.

Thai and foreign buyers may have different motivations for condominium purchasing, which creates an interesting dynamic when it comes to pricing and future resale.

This is clear in the current quota system, which divides condominiums into two separate markets: Thai and foreign. If you are a Thai and buying into a project, your future gains are greatly limited as you are buying part of the Thai quota and can only sell to a Thai.

Essentially, Thais cannot sell to foreigners. So the foreign quota system is actually working against Thais themselves and hindering them from profiting from real estate investments in the future.

Because of the quota, it raises serious questions for developers regarding whether it is worthwhile investing in destinations that are not popular with Thai nationals.

In Pattaya, it is a slightly different story, where we are seeing an increase in Thai buyers, as they see investment potential in terms of both capital gains and rental returns due to the active executive expatriate and retiree rental market in the area.

Hua Hin presents a different case altogether, due partly to its long association with the Royal Family. But the former high percentage of Thai buyers against overseas buyers is changing. The split used to be 70% Thais, 30% foreigners. Now it is 60% Thais and 40% foreigners. Once foreign demand reaches 49%, Thais will no longer be able to sell to them.

The stage is set for Thailand’s property industry to continue to benefit from the international perception created by the tourism industry, but if key issues are not solved, there is a risk the industry will never reach its full potential.

Perhaps we are not doing enough to create awareness in the right circles. But if there is not a change soon, we could lose opportunities to neighbouring countries such as Vietnam and Malaysia, who have adjusted regulations to entice overseas buyers to their countries.

It is unlikely that Vietnam will be taking any property investment business away from Thailand soon, because there’s no stock and little infrastructure. It is still not considered a “world” destination.

In other words, everyone knows where Phuket is, but they don’t know about Na Trang. However, they will in the future and destinations like Na Trang will certainly become competitors.

The main point is that these countries are prepared to change their rules and regulations to attract foreigners. They want foreigners to come and buy their real estate.

As such, it is not so much a question of how much Thailand is losing from the quota system, but how much it could be gaining if the Condominium Act increased the quota for foreign buyers.

This is extremely important to a developer’s investment strategy. They don’t want to have 50% of their buildings sitting empty with no or few prospects of finding a buyer.

Thailand’s property sector and all the associated industries could receive a huge boost in investment, which would benefit the entire nation, if it raised the foreign quota in the nation’s condominiums. It is what the industry, and indeed the country, truly deserves.

Higher foreign quota will spur resorts

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Source: Bangkok Post

The time is right for foreign investors to invest in Thailand as the economy will see limited effects from high oil prices and the US sub-prime problem, Industry Minister Suwit Khunkitti said yesterday.

Addressing the British Chamber of Commerce Thailand (BCCT), Mr Suwit said Thailand was more resilient in the face of high oil prices as alternative fuels were available including natural gas, biodiesel and gasohol.

Thailand last year cut its import volumes of crude oil and fuel oil by 5.5% and 5%, respectively, while sales of fuel-efficient cars increased by 40% in the first three months of this year, he said.

On the effects of the US credit woes, the minister said Thailand had more diversified export markets to offset the falling exports to the United States, including China, India, Australia and the Middle East.

Despite the US slowdown, Thai exports rose 24.1% in the first three months of this year in dollar terms, with high commodity pushing up the value of agricultural products by 31.4%. Mr Suwit noted.

‘’Thai financial institutions are unlikely to be directly affected [by the sub-prime crisis] because they have limited exposure to those high-risk products,'’ he said.

The development of Suvarnabhumi Airport as a regional air hub, as well as more roads to better connect Thailand with neighbouring countries, were also positive factors, he said.

‘’This is the time to invest in the region, especially in Thailand, to cash in on the prosperity of this region and regional integration. Thailand is the country of choice for investment in Asia.'’

Any revisions of rules and regulations initiated by the current government would result in a more more investor-friendly approach, he added.

‘’The revision, for example of the Foreign Business Act, would make regulations more pro-investment, making investors feel more confident to invest and do business in Thailand,'’
said Mr Suwit, also a deputy prime minister.

As well, he said, the investment promotion criteria of the Board of Investment (BoI) would be adjusted to be more ‘’convenient and transparent'’ and the process of approving applications would be shortened to only 15 days.

To make Thailand a better investment destination, the BCCT yesterday submitted a package of recommendations to Mr Suwit to strengthen the kingdom’s attractiveness against lower-cost neighbours, mainly Vietnam and China.

BCCT director Stephen Frost urged the government to open up the education and training industry, in which UK businesses were keen to come to Thailand.

‘’In Thailand, educational institutions can’t be 100% owned by foreigners, which is allowed in Singapore,'’ Mr Frost said.

Suwit says Thai economy is still very resilient

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