New condominium boom for Pattaya

25 Aug 2010, Bangkok – A 20% increase in supply expected in 2010

2010 will see the skyline change in Pattaya city with a 20% increase in supply due by the end of the year according to the new Pattaya City Condominium Market Report for the first half of 2010 by Colliers International Thailand.

“Absorbing such an influx in demand will be challenging” pointed out Antony Picon, Senior Manager for Research & Advisory at Colliers. “However the Pattaya market is increasingly attractive to domestic buyers from Bangkok, drawn to areas away from Pattaya beach, such as Wong Amat” he added. 

Colliers is the only international property services firm that has an office in Pattaya and Mark Bowling, Sales Manager of the Pattaya office remains bullish in the long term despite difficulties. “Like the rest of Thailand the recent troubles slowed down activity in Pattaya for a while but business is picking up considerably” he said. “Local buyers continue to be big players in the market, mostly looking for a second home away from Bangkok”.

Patima Jeerapaet, Managing Director of Colliers International Thailand noted the difference in buying patterns between Bangkok and Pattaya. “In Bangkok, foreign demand is targeted to the luxury market. However in Pattaya, foreigners essentially drive the lower end condominium market with developments over half a kilometer away from the beach” he commented. “Most of these buyers are retirees with limited capital and income so they can only afford units below 2 million baht, while the local buyers  are often wealthy  Bangkokians looking for luxury accommodation.”

Mark Bowling pointed out that the greying babyboomers would propel demand for mid-range to cheaper units for the rest of the decade although he was concerned more about the strength of the baht than political uncertainties. “The baht was in the mid-seventies to the British pound about four years ago but is now hovering around fifty, that seriously affects the spending power of many people who wish to buy properties in Thailand” he noted. 

Antony Picon’s analysis for Pattaya going forward was of a property market in the process of maturing with a number of local developers firmly establishing themselves and the overall market segmenting itself with up market locations such as Wong Amat distinguishing themselves from other parts of Pattaya city. “The growth of the city overall is now leading to particular areas fashioning their own identities and this looks set to continue” he said.

Mark Bowling is convinced that the Pattaya property market will continue its robust growth over the next ten years. “ Pattaya is in amongst the industrial estates that are fueling Thailand’s economic growth and this is an important factor in its development” he pointed out. “Also with the new highway you can now get to Pattaya from Bangkok in less than 90 minutes and so the city will be a far greater attraction for those wishing to escape Bangkok for a day or two” he added.  To highlight Mark’s confidence, Colliers have relocated their Pattaya office to a high profile location on Second road, opposite Central Festival Pattaya Beach in order to better serve their clients.

Thailand Property Market Rebound

The Bangkok hotel market had a good Q1 2010 on the back of a return of robust tourism figures highlighting the enduring appeal of Thailand and its capital city. Occupancy rates for the Luxury/Upper scale segments came just shy of the 70% mark. Of the four areas in the city centre, The Riverside recorded the lowest rates and the Southern CBD (Sathorn/Silom) the highest.

The future of the market remains unclear due to the considerable new supply of rooms being brought to the market in 2010 and 2011. This year will witness the greatest addition of new supply of Luxury and Upper scale hotels to Bangkok in its history. This is likely to squeeze occupancy levels which in turn will lead to pricing pressures even in a stable political climate. The current situation is a grim time for the industry and we must wait for Q4 until we have a better idea of how much tourism has been affected.

Hotels will still have to cope with increasing competition from serviced apartments for the short stay market. The Bangkok serviced apartment market is facing a difficult 2010 with a significant increase in supply while demand has fallen and is likely to remain down until confidence returns.  Conversely the serviced apartments may benefit at the expense of apartments for lease due to uncertainty from foreign residents leading to a requirement for shorter term leasing contracts provided by serviced apartments. However such benefits will be short lived.

From 2009 to 2011 it is expected that overall supply of serviced apartment units will have risen by 40%. This will be difficult for the market to absorb. Average occupancy has continued to fall in Q1 2010 to the 65-70% mark for long term stays. This pattern is likely to continue until supply stabilizes and demand picks up again.

The retail market remained stable for Q1 2010 due to growing consumer confidence but was adversely affected by protracted political uncertainty.  Only one new retail outlet was added to supply in Q1 2010 in the form of a community mall located in Sukhumvit. Rentals remain stable while only the city centre recorded a small increase in take up of 3% in Q1 q/q.

The current closure of Centralworld and Centre One are unlikely to lead to an increase in rentals due to the limited time they will be inoperable before rebuilding and renovation are completed and lower consumer confidence expected in the wake of the violence. The short term prospects of the retail market in the centre hinge on incentives and special events that can lure shoppers to the main shopping streets again. The severely reduced tourism numbers will also negatively affect the retail sector in the centre.

No new office supply came onto the market in Q1 2010 and only a very limited supply is expected until Q4 2010 with the scheduled opening of Sathorn Square. Occupancy rates fell by 1% in the CBD and Outer CBD while the Northern Fringe recorded a nearly 1% increase in Q1. Rental rates remained more or less the same in the CBD for Q1, although a fall in rates was more pronounced in the Northern Fringe. This was likely to be a correction to the steep rise in 2009.

Companies are still assessing the impact of the recent events and whether further instability will ensue for the rest of the year before making relocation plans. In the shorter term there could be an uptick in demand coming from firms occupying space as back up for reoccurring violence disrupting operations. However any positive effect will be temporary as protracted unrest will cause investment and employment to fall thus negatively impacting the market.

The bright spot in property remains the condominium market.  New launches in Q1 2010 continue the breakneck pace set in the last quarter of 2009. Many developers are targeting affordability and selling out in a matter of hours in some cases. Tax incentives remain an impetus to temporarily boosting existing supply and the future expiration of incentives at the end of May are likely to cool the market, allowing for some consolidation. Demonstrations in Bangkok have had only a limited affect on condominium launches as end-user buyers maintain interest in purchasing their first property.

2010 is likely to see the largest influx of new supply since 1997 with an estimated increase of just over 30,230 units compared with approximately 27,430 units in 2009. About 6,940 units were supplied in Q1 2010. Smaller developers are entering the market again but with projects with fewer units than the large listed players.

Overall the property market will enter a period of stasis while the country faces up to its deep divisions. Foreign investment will begin to flow into the market only when these have been addressed and a more liberal business climate is established.

For further information, please contact:
Colliers International Thailand
Dr.Patima Jeerapaet
Managing Director
Tel : 662 656 7000
E-mail : patima.jeerapaet@colliers.com

Mr.Jean Marc Garret
Director of Hospitality Department
Tel : 662 656 7000
E-mail : jean.garret@colliers.com

Mr.Antony Picon
Senior Manager | Research & Advisory
Tel : 662 656 7000
E-mail : antony.picon@colliers.com

Mr.Surachet Kongcheep
Manager | Research & Advisory
Tel : 662 656 7000
E-mail : surachet.kongcheep@colliers.com

Colliers International Thailand
appoints new director of hospitality department "Jean Marc Garret"

Colliers International Thailand has recently announced the appointment of Mr. Jean Marc Garret, a French national, as Director of Hospitality Department, to direct the growing business of Hotels and Leisure.

In his new role, Jean Marc in addition of the fundamental hotel brokerage activity of the group in Thailand will be responsible for our Consultancy Services Division, providing.

Hotel Financial Assistance, Corporate Solutions, Project Development Support, Asset Management as well as assisting in the development of investment programs and all related opportunities.

A 30 year group hotel veteran, he brings with him a wealth of experience in the tourism and travel industry. A graduate of the University of Law and Economics of Nice in France, Mr. Garret first arrived in Thailand more than 22 years ago to participate in the opening of Le Meridien in Phuket.  He has since become a resident of Thailand where he also served as Honorary Consul of the Principality of Monaco and President of the Franco Thai Chamber of Commerce.

Mr. Garret is particularly well known within the hospitality industry circles for his keen business acumen and foresight in the field of development as well as management of hotel properties.  He has diverse records of success in the areas of consulting and operations with global hotel chains such as Accor, Le Meridien and Choice Hotels International in Thailand.

Prior to joining Colliers International Thailand, he was with the Centara Hotels & Resorts group, for the last 12 years with his last position being Senior Vice President Development.

Jean Marc Garret is also Chairman of the Tourism Committee of the Joint Foreign Chamber of Commerce.

Colliers International Thailand believes that with his track records of expertise in the local market, Jean Marc will be an added asset in our Team to accelerating success and contribute to help our clients to make the right choices for their Hospitality business.

New launches in Q1 2010 continue the breakneck pace set in the last quarter of 2009

The condominium market continues to be the star performer in the Bangkok real estate market with new launches and supply continuing to register record growth. This was the main conclusion of the latest Bangkok Condominium Market Report from Colliers International Thailand for the first quarter of 2010.

“We have witnessed another bumper quarter for the condominium market in Bangkok, a welcome state of affairs amid the continuing uncertainty clouding other property sectors” stated Dr. Patima Jeerapaet, Managing Director of Colliers International Thailand.

“Nearly 13,700 units were launched in Q1 2010, a handful less than the previous quarter” observed Dr. Patima.

It was not only launches that made the news this quarter. “This year is likely to see the largest completion of new supply since 1997 with an estimated increase of just over 30,230 units compared with approximately 27,430 units in 2009” pointed out Mr. Surachet Kongcheep, Manager of Research & Advisory for Colliers International.  About 6,940 units were supplied in Q1 2010.

Dr. Patima believes that the tax incentives remain an impetus to temporarily boosting existing supply and the future expiration of incentives at the end of May are likely to cool the market, allowing for some consolidation.

Whilst other sectors have been affected by the recent unrest in the capital, the condominium market remains immune. “Some launches have been slightly  affected  by the physical constraints caused by the recent demonstrations but not by any discernable lack of sentiment” Dr. Patima stressed. “End-user buyers maintain a strong interest in purchasing their first property” he added.

The key to the success in the condominium market recently is in large part due to the efforts from the developers themselves in tapping into pent up demand. According to the Real Estate Information Center (REIC) 88% of purchasers of new condominium units are first-time buyers. Most of these buyers are attracted to the low to mid end projects offering smaller sized units. “We are witnessing a rapid take up of units in the million and a half Baht range that appeal to first time buyers wishing to place their first steps on the property ladder” pointed out Antony Picon, Senior Manager for Research & Advisory at Colliers International. These are mostly one-bedroom units ranging from 26 sq m to 40 sq m. “The design of these units is interesting as the smaller units tend to have sliding doors in order to utilize space and can really function as studios as well” Mr. Picon added.

Affordability is likely to be the key demand driver going forward spurred on by the ongoing growth in mass transit railways.  While the majority of newly launched developments were in the low to mid end category, the PYNE by Sansiri was sold out in one day and showed the resilience of the high end market as well. Most of the large scale developments were launched by listed developers such as LPN Development, Pruksa Real Estate and Asia Properties. “The experience and financial underpinning of the listed companies is critical to large scale projects” stated Mr. Picon

However, smaller non-listed developers launched a wide variety of projects in Q1 2010. In fact the majority were from these but the overall number of units was less than from the listed ones. Mr. Surachet stated that the average number of units from listed developers launched in Q1 2010 was 707, while the average from non-listed ones was 280. Mr. Picon said “ Those smaller developers are starting to dip their toes in the water although a lot more tentatively than in the past”.

Mr. Picon believes that the successful model for the condominium market that has been established here can be partially replicated in other countries. He tells of a friend of his who visited from Vietnam and viewed some show units in Bangkok recently. “He was exasperated that such condominiums, using high quality materials and designs as well as far superior facilities and affordable unit sizes, did not exist in Ho Chi Minh City”.”It could be time to export some of that success” he concluded.

For further information, please contact:

Colliers International Thailand

Dr.Patima Jeerapaet
Managing Director
Tel : 662 656 7000
E-mail : patima.jeerapaet@colliers.com

Mr.Antony Picon
Senior Manager | Research & Advisory
Tel : 662 656 7000
E-mail : antony.picon@colliers.com

Mr.Surachet Kongcheep
Manager | Research & Advisory
Tel : 662 656 7000
E-mail : surachet.kongcheep@colliers.com

Cash-rich Investors Opt for Property Assets for Recurring Income
115% Surge in Greater China & 259% Increase in South Asia
Focus Shift from Residential to Office Sector in Asia Pacific

26 March 2010, Bangkok – The real estate market in Asia Pacific continued to benefit from the improving sentiment and the gradual economic recovery in the second half of 2009.  Rebounding from the trough seen in 1Q 2009, the region experienced a significant surge in sales transaction volumes during the second half of 2009.  Compared to 2Q 2009, the total turnover of real estate investment transactions in 4Q 2009 increased 115% to US$8,840 million in Greater China, and 259% to US$3,262 million in South Asia.

“Greater China was the key contributor to the upsurge in market volume during the second half of 2009, despite a number of measures implemented by the Central Government to curb speculative purchases,” said Piers Brunner, chief executive officer, Asia of Colliers International.  “Meanwhile, cash-rich investors can opt to keep property assets in their portfolio for recurring income.”

Elsewhere in Asia Pacific, the pace of recovery in terms of volume was generally slower than expected.  In Australasia, the overall volume in the second half of 2009 remained 50% below the levels seen before
the financial crisis, due to rate hikes and sales withdrawals by individual vendors.

Amongst different property sectors, residential sector took the largest slice in the region.  The turnover of residential property investment transactions was US$5,229 million in 4Q 2009, registering a 116% increase from 2Q 2009.  In terms of growth rate in the second half of 2009, industrial property investment transaction recorded the steepest rebound, with a 253% rise in turnover from 2Q 2009 to US$1,505 million in 4Q 2009.

“Despite the surge in both capital values and transactional volume during the second half of 2009, the leasing market has yet to catch up,” said Simon Lo, director of Research & Advisory, Colliers International (Hong Kong).  “This was reflected in the fall of investment yields in the region.  Comparing 2Q 2009 to 4Q 2009, the yields of the key property sectors, including office, residential, retail and industrial sectors, in Greater China and South Asia, have registered falls of 3 to 100 basis points.”

The property rentals continued to trend downwards during the second half of 2009 due to fragile occupational demand.  “In individual centres, higher-than-average vacancy rates in the secondary markets and plentiful new supply remain the challenges in their leasing markets,” mentioned Simon.  “However, with the gradual economic recovery, together with real growth in real estate demand as a result of job growth and business expansion, the leasing market might hit bottom in the second half of 2010.”