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Property investors focus on Asia

Asia’s real estate markets are outperforming the slowing US and European markets. The main countries benefiting from this trend have been the larger markets such as Japan, Hong Kong and Singapore, and there is now an increasing focus on Thailand, according to leading international property consultants CB Richard Ellis.

Property investment has become a global market with a rapidly increasing number of cross-border transactions.

“Property markets used to be dominated by local investors but this is no longer the case. In many ways, property investment has become similar to the equity markets with investors looking for worldwide opportunities,” said Ms. Kulwadee Sawangsri, Director of Investment Properties at CB Richard Ellis Thailand.

Many Asian property markets have performed strongly over the last two years and international investors now see the possibility of Thailand outperforming regional competitors.

Last year, office rents in Singapore doubled, whereas there was almost no growth in office rents in Bangkok. International investors are focusing more on Thailand because they feel that there is more room for growth.

Investors’ confidence in Thailand has improved because of some of the early policy measures of the new democratically elected government such as the removal of inbound capital controls and tax incentives to help the property sector. An escrow law is also being put in place which will facilitate large property transactions.

The Thai market is challenging because there are restrictions on foreign ownership and a scarcity of income-producing buildings available for sale and so most international investors have focused on new development rather than the acquisition of existing assets.

High-end Bangkok condominiums, hotels and residential resort developments have been the most active sectors.

Foreign investors have in some cases formed strategic joint ventures on multiple projects with a Thai partner. For example, Singapore-based Capital Land is in a joint venture with Charoen Sirivadhanabhakdi’s TCC Group and is just completing the Athenee Residence, a luxury condominium on Wireless Road.

IFA Hotels and Resorts, listed on the Kuwait Stock Exchange, acquired a stake in Raimon Land, a Thai publicly listed luxury property developer.

Istithmar, a private equity firm based in Dubai, has agreed to invest in the W Hotel which is currently under construction in Golden Land’s Sathorn Square project.

The resort market was also very active last year, with Hong Kong’s PCPD buying the Thai Muang golf course in Phang Nga and Destination Properties buying two hotels in Phuket.

CB Richard Ellis believes that, this year, investors will be focusing on site acquisition for condominiums, offices and hotels in Central Bangkok. “The mass transit routes have firmly anchored Bangkok’s Central Business District. There is now a scarcity of development sites in the Central Business District and strong competition from developers when freehold sites come on to the market,” added Ms. Kulwadee.

CB Richard Ellis has recently been appointed as sole agent to sell a prime site on Sathorn Road and already strong interest has been shown by potential purchasers.

Meanwhile, in Bangkok’s suburban locations, developers continue to acquire sites for mid-market condominium developments.

Competition will also remain strong for any grade A building that comes onto the market. This is a rare occurrence in Bangkok, where only three grade A office buildings have been sold in Bangkok in ten years, and is because there are relatively few vendors.

Thailand’s resort markets continue to attract investors with the focus being on development because few existing properties are available for sale.