|
Better year aheadHomebuyer confidence is reviving and should remain healthy as long as the interim government can keep the economy on a stable growth path By KANANA KATHARANGSIPORN
Improvement is likely as long as oil prices do not start rising again, interest rates start to decline as most experts expect, and the political outlook is clearer, according to Anuphong Asavabhokin, chief executive officer of Asian Property Development Plc (AP). He noted a change in consumer and homebuyer sentiment not long after the Sept 19 coup, which brought relief of sorts to months of confidence sapping political drift. ‘‘The government should just boost the country’s economy and watch the inflation rate,’’ he says. ‘‘ Incentives for stimulating the property market are not necessary as they actually help reduce developers’ burden rather than the burden of buyers.’’ Mr Anuphong says GDP growth has a correlation with the unemployment rate, which affects the housing market, so the government should strive for stable and consistent growth, currently forecast at between 4% and 5% in 2007.
‘‘Developers will have to be more flexible, able to control all costs and diversify locations,’’ he says. Better information on the market will also be important. ‘‘We want to see the information related to property to be accurate and up-to-date so that developers can analyse[demand]before marketing.’’ He also cautions that proximity to mass transit will not always be a ticket to sales success the way it has been in the past two years. The reason, he says, is that as the subway, sky train and light-rail systems expand over the next five years, consumers will have more transport choices and better connections from far-flung areas. ‘‘Some locations [close to mass transit] will be good and some will not. People won’t need to move to the heart of the city anymore as mass transit will reach their current homes no matter how far.’’ Housing registrations, meanwhile, are expected to rise at least 5% in 2007 as more than 10,000 condominium units sold in 2004-05 are completed and transferred to buyers. However, the total value will decrease by as much as 20-30% as most of the sales will involve lower-priced units. Issara Boonyoung, vice-president of the Housing Business Association, agrees with Mr Anuphong that the property market needs no special support as long as the political and economic situation is good. ‘‘Stable interest rates and unexciting oil prices are enough for the property market, ’’ he says, since it depends mainly on consumer confidence. He expects more growth in the market in 2007 due to pent-up demand in 2006. Many homebuyers put off decisions in 2006 because they were worried about a host of factors, from politics to oil prices, and the impact on the economy of everything from bird flu to southern unrest. ‘‘The current government will not stay for long so it should speed up drafting a new constitution and show the public the former government’s corruption as promised,’’ says Mr Issara. Thongma Vijitpongpun, the president of Preuksa Real Estate Plc, said that both developers and buyers felt the impact of unfavourable economic factors, chiefly oil prices and interest rates, in 2006. Higher oil prices added to developers’ construction costs, while each one-percent rise in interest rates trims buyers’ purchasing power by 8%. ‘‘These factors pushed homebuyers to consider units priced 10-20% lower than the one they intended to buy. Many buyers shifted to smaller-sized and lower-priced units to match their budget.’’ The most successful market segment by far in2006 was condominiums close to the BTS and MRT networks. ‘‘This trend will continue into 2007,’’ says Mr Thongma.
Kitti Thanakitamnuay, chief executive of the listed developer Noble Development Plc, says the market in 2006 achieved equilibrium and prices did not rise much, so units were affordable for buyers. He also agrees that condominiums pitched at younger buyers will continue to be big sellers. Several factors are driving demand, including a trend among young people to move out of their parents’ homes at an earlier age, not necessarily waiting until they marry. Suphin Mechuchep, managing director of the property consultancy and agency Jones Lang LaSalle (Thailand), says a clear policy on government mega projects would help the residential market, and should also encourage foreign investors to join with Thai partners. Of particular concern to foreigners has been the government’s investigations into the use of local nominees to hold shares in foreign-controlled businesses. If this can be resolved and clarified, she says, it would be especially good for resort investment in places such as Samui and Phuket. Although the new government is not looking to stimulate consumption as aggressively as its predecessor had done, Mrs Suphin believes the Thai property market will continue to expand due to the reduction in family sizes. ‘‘This will be good for the overall economy as the demand for smaller sized residential units will create forced saving. Therefore, the market will still be good next year.’’ David Simister, the chairman of CB Richard Ellis Thailand, believes the resort property market will remain largely unaffected by political events, noting that transaction volume and interest remained high. Demand from foreign buyers for resort properties and also for Bangkok condominiums appears to be immune to political change, he says, as buyers are fairly realistic about the long term. In the broader perspective, he says, foreign buyers may see a clearer picture of the growth potential of Thai property than Thai residents who are distracted by political events. A good year to own an office buildingA limited supply of office space and good returns from higher rental rates will benefit building owners and may prompt some major building sales next year, according to a property consulting firm.
‘‘It will be a golden chance for office building owners,’’ she says. ‘‘Some of them will grab it as they want to have more value from selling the asset during the peak of the office market, while some don’t want to hold an office building since it is not their core business.’’ In 2006, five direct purchases of office buildings in Bangkok worth a combined six billion baht were completed: Diethelm Towers, Italthai Tower, Unico House, the half-built Wattachak Building and the leasehold Fenix Tower. The Government Pension Fund’s purchase of Diethelm Towers on Wireless Road for three billion baht was the year’s largest deal. The fund bought the building, which it renamed GPF Wittayu, from the century-old trading company. Ms Murphy says the outlook for the Bangkok office market in 2007 remains positive. Supply will still be limited and demand is likely to continue as businesses expand.
She says rents will rise further, mostly in the prime grade A segment. In the Central Business District (CBD), rents will grow at a slower pace as resistance from tenants to rental rates in excess of 700 baht per sq m per month is clear. Office buildings in non-CBD locations but well-serviced by public transport are witnessing very strong demand and are likely to benefit from the shift away from the CBD by tenants who are more conscious of their bottom lines. ‘‘Office market growthin2007will be less than 20%, lower than in the past few years as it has already hit the peak,’’ says Ms Murphy, adding that the market put in a strong performance in 2006, marked by limited supply and continued demand.
According to JLL studies, seven new office projects were completed in 2006, with combined space of 238,500 sq m. That bought total stock to 7.33 million sq m. Except for the 59,400 sq m at Q House Lumpini, all new office space completed during the year is located in fringe locations. Despite a lot of new supply, the average vacancy rate for office space was stable at around 13% across Bangkok. ‘‘Overall strong demand for office space remains, however, as take-up rates in 2006 have been lower than 2005. There has been an undeniable temporary wait-and-see attitude delaying relocation decisions in the second half of this year,’’ says Ms Murphy. The findings also indicate that office rents have escalated steadily with the average rental rates for the overall market. Those grew by 4.5% from 379 baht per sq m per month in January to the present level of 396 baht. In the CBD, rent averages 650 baht for grade A space and 487 baht for grade B space. A number of prime grade A buildings increased asking rentals to as high as 850 baht. GHB retools to stress quality over quantity
‘‘Only two projects initiated by the Thaksin Shinawatra government were abolished: mortgage cards or personal revolving loans, and the knocked-down housing project,’’ says GHB president Khan Prachuabmoh. ‘‘Mortgage cards may cause more debt as the programme has no fixed repayment period, while the knocked-down housing project duplicated the Baan Ua-arthorn project.’’ Financial support for buyers of homes under the Baan Ua-arthorn low-cost housing project will continue but the GHB needs to be more scrupulous in releasing funds, despite a five-year buy-back guarantee from the National Housing Authority (NHA). Meanwhile, a programme that offers housing loans with leasing contracts as collateral, a refinement of the Thaksin government’s more ambitious asset conversion scheme, will focus on lessees of property owned by the Treasury Department, the Crown Property Bureau and the Office of the Privy Purse. Loan periods must be shorter than the original lease contracts.
Mr Khan says the bank will release housing loans for the Baan Munkong project after it signs an agreement with the Community Organisations Development Institute (CODI). ‘‘We cannot give housing loans directly to people in slums as they have no salary slips. We will give them through a co-operative, being set up by CODI, which people will repay each month. Any co-operative that has a punctual payment record will get our support,’’ he says. He says the bank will also offer another phase of the GHB-GPF (Government Pension Fund) home loan programme for civil servants after launching three phases with special fixed rates for the first three years: minimum retail rate (MRR) -1.50, MRR-1.25 and MRR-1.00 respectively, followed by MRR-2.25 afterwards. However, the Finance Ministry has asked the GHB to revise the rates in the fourth years onward or the bank might have no profit in the long term. The new rates might be MRR-1% or 1.5%. The state bank is also working to improve the availability of real estate information and expects to meet with industry players in January to discuss what they need As well, Mr Khan says the GHB will seek firms specialising in mortgage insurance to form a joint venture with the bank. If the venture is successful, the bank will likely exit and allow it to continue on its own. Securitisation of its large pool of mortgage assets to help the GHB mobilise more funds for lending is also in the pipeline, likely with an overseas partner and an initial target of 40 billion baht. Mr Khan foresees stable to declining interest rates in the year ahead, which will be a positive factor for the property business and homebuyer confidence. ‘‘2007 will be the year of cleaning our house (GHB). We will not focus on higher releases of housing loan but will screen customers more,’’ he says, adding that the target for new lending would be 80-90 billion baht, down from an earlier goal of 100 billion or more. ‘‘We will undertake pro-active programmes to improve human resources and skills, implement a core banking system, clear non-performing assets (NPAs) and renovate the branches.’’ The president says the bank will open more counters in shopping centres than new branches due to the lower investment — less than two million baht as opposed to 20-30 million for a full branch. ‘‘There’s no problem with long queues in a micro-branch. Customers will not have to wait but can go shopping while waiting for their turn. We will send a message or page them when their turn arrives,’’ he says. Baan Ua-arthorn goals more realistic
‘‘We will not target how many units need to be developed within how many years anymore. The project will be developed in line with people’s demand and our capability,’’ says Pornsak Boonyodom, the governor of the National Housing Authority (NHA). He says the NHA will develop low-cost housing under the sufficiency economy policy with a sustainable and long term plan. Based on the NHA’s capability and the government’s budget, that means 40,000 to 50,000 units a year. ‘‘If housing demand from low-income earners remains, we will continue the development for them. Maybe more, maybe fewer than one million units but without a limited period,’’ he says. During the Thaksin regime, the NHA had to dedicate almost all of its resources to Baan Ua-arthorn in order to achieve a highly ambitious target of 601,727 units within five years from 2003 to 2007. But construction delays and other problems meant that the number of units completed as of October 2006 totalled only 52,211. Units under development totalled 279,084, those waiting for land transfers totalled 19,454, those waiting for construction contracts 74,067, and 176,911 units remained unsigned. The main problems contractors found were liquidity, limited availability of construction equipment, a shortage of labour, and management problems. Besides awarding construction contracts, the NHA plans to provide a new prefabricated construction system that will help contractors save costs. ‘‘We have a measurement machine for testing the prefab construction system. We will develop a model of pre-fab technology for building Baan Ua-arthorn units and give it to contractors,’’ said Mr Pornsak. The price of a Baan Ua-arthorn unit would remain unchanged at 390,000 baht despite rises in oil prices and construction material costs. The NHA is also drafting a national master plan for housing development to cover all social segments, not only low-income earners. It will invite input from developers and other stakeholders at seminars in early 2007 to set a framework for the next five to 10 years. It will also revive the national housing policy board that was abolished prior to the 1997 economic crisis. The board will replace the housing policy subcommittee under the National Economic and Social Development Board. Besides a master plan and housing development programme for low income earners, the NHA’s 2007 missions include improvement of quality of life, environment and community, city development and the restoration of large deteriorated communities. |
||||||
| © Copyright The Post Publishing Public Co., Ltd. 2006 Privacy Policy Comments to: Webmaster Advertising enquiries to: Internet Marketing Printed display ad enquiries to: Display Ads Full contact details: Contact us |
||||||
The property market in 2007 will be brighter than in 2006, despite a lack of explicit policies to promote it, as long as the interim government can maintain political stability and a positive economic outlook, industry executives say. 
He sees the nature of competition in the year ahead differing by product segment, geographic location and price range. 
Caroline Murphy, head of markets at Jones Lang LaSalle Thailand (JLL), says many overseas investors interested in acquiring office buildings will continue to look in Bangkok.
In 2007, seven buildings with a total area of 298,550 sq m will come on the market. Two of them—Athe’ne’e Tower and Ratchada Tower — are owned by TCC Land’s Charoen Sirivadhanabhakdi. Others are King Power Complex, to be wholly used by the owner, East Water Headquarters, Pratunam Complex, Pipatsin Tower and Jamjuree Square, formerly known as CU Hi-tech Square.
The new government’s focus on the sufficiency economy has prompted the Government Housing Bank (GHB) to revise its 2007 strategic plan and focus more on sustainable housing loans rather than non-housing programmes and high lending volume.
The Baan Ua-arthorn low-cost housing project, a flagship populist programme of the Thaksin Shinawatra government, will become a part of the housing development master plan under the Surayud Chulanont government.