Building cost impact low at high end

By NIGEL CORNICK (bangkokpost.com)

No one can dispute that costs have been rising for the property industry in Thailand and some developers in the low- to midmarket segment may be feeling the pinch.

Record-high fuel costs are affecting energy and transport costs. Demand for construction materials is high too, placing a premium on prices. In the face of such challenges, many developers may look to downgrade materials, specifications or simply delay projects.

However, increases will have less impact on the market’s upper end and will not impinge on the high specifications luxury developers have set.

For one thing, high-end buyers accommodate higher prices to a greater degree than those seeking lower-end residences, who are much more price-sensitive. Premium real estate buyers also understand the reasons behind the increased costs and absorb them.

It is a fact of life currently that raw material costs such as steel - its price has doubled in the past 12 months - and concrete are difficult to control, as they are staples of the building industry. This has led to some developers, including our company, Raimon Land, to take steps to hedge by paying upfront to secure a better price. This is one way that developers can manage costs.

It is a very volatile situation compounded by high worldwide demand driven by the huge appetites for materials in China, the Middle East and India.

Take our upcoming development, 185 Rajadamri. Prices will eventually break through the 300,000 baht per square metre price barrier, which would be double the average price budgeted when we acquired the site some time ago.

However, the quality of the product and location will be the key factors in driving the price up over time, rather than the increasing costs of construction.

Thailand still holds a strong advantage over other countries in the luxury condominium sector. There will be some convergence on price, but fuel costs overseas are higher than in Thailand and the pricing here for property is still relatively low compared to international markets. A lot of our buyers still see property here as very competitively priced and extremely good value.

Some developers at the lower end may look to design and specification changes to lower costs, especially on final finishes. They may paint external walls rather than use stone or tiles, lower standards on finishes to interiors and public areas or cut corners on appliances, sanitaryware, glazing and wood joinery.

We will not downgrade any of the specifications at our developments, rather we will check for efficiencies. This will be the same for other reputable luxury developers.

Although there is a certain price to pay for a high level of design efficiency, we are looking at all specifications and designs in great detail to ensure that there is no wastage. We have refined our designs so that the end products are not affected.

At 185 Rajadamri, for example, the elements that set it apart as a luxury development, such as optimised unit planning to maximise prime views to Lumphini Park and the Royal Bangkok Sports Club, and a wide variety of unit types to give buyers flexibility in choosing size, layout and orientation at the expense of building efficiency, all remain in place. We are using 3.8-metre floor-to-floor heights with full-height double-glazed windows to allow for clearer glass with increased thermal performance.

Despite rising costs, luxury property developers should not compromise their quality standards, especially when reaching for new heights in design.

For a condominium to set itself apart as a luxury development, it must continue to embrace key design elements and offer a wide variety of typologies such as simplex and duplex condominium units. A successful luxury high-rise must provide buyers with flexibility regarding unit size, layout and orientation.

Along with surveying all aspects of specifications and design to ensure no material wastage, and forward buying to lock in today’s prices, developers should secure good long-term contractor partners to guarantee that projects finish on spec as well as on time.

Currently, there is a shortage of quality contractors, but there are also a lot of properties being marketed, and one must wonder who will be building them. A professional developer should have strategic partnerships with top-notch global contractors, which instills confidence in buyers.

Nigel Cornick is Chief Executive Officer of Raimon Land Public Co., Ltd, Thailand’s premier luxury property developer with projects in Bangkok, Phuket and Pattaya. For more information visit http://www.raimonland.com

Increase in foreign investors and residents leads to real estate boom on resort island

By Achadtaya Chuenniran (bangkokpost.com)

Real estate development is booming in Phuket as foreign investors are acquiring vast areas of land for housing projects. A number of foreign developers are to set up companies with Thai business partners to build housing estates and residential projects on the resort island, which has entered what officials call the ”golden age of real estate development.”

Homestay, a type of lodging offering facilities and lifestyles close to those typical of Thai families, has emerged as a popular choice. Swedish businessmen are the latest group to express strong interest in this kind of project.

”Foreigners highly admire the scenery and weather here,” said Phuket governor Niran Kalayanamitr after talks with the Swedish firms.

He said the investors saw an opportunity for homestay development to serve Swedish travellers.

A number of new homestay facilities have sprung up in Ban Layan and Ban Naitorn in Thalang district as well as other areas around the island.

Other investors have also asked the province for approval for different real estate projects.

A group of Norwegian businessmen suggested a Phuket bay development project, with technology friendly to the marine environment. Investors from the Middle East have expressed interest in developing logistics for a free trade zone near the deep-sea port.

The increasing demand has boosted land prices in the resort provinces. Phuket land official Tanet Niyom said certain seaside areas, especially those near famous Patong beach, sell for up to 50 million baht a rai.

Prices are cheaper in Muang district, but they are still around eight million baht a rai.

The value of land trading between 2006 and 2007 stood at 1.5 billion baht, according to the Phuket land office, but officials expect the value to go up to nearly five billion baht this year.

The rapid expansion of real estate development indicates that more foreigners want to stay for a longer period.

Officials are currently surveying the exact number of foreign residents, including those who do not properly report to the immigration office.

Foreign residents can be categorised into three groups _ those who want to live here permanently, those who are working here, and those who want to live here for longer periods than their visas specify, according to Sompot Nipakanon, assistant director of the Bangkok Phuket hospital.

He said foreigners also appreciated medical services in the island resort. Bangkok Phuket hospital currently serves up to 200,000 people a year, 30% of which are foreigners.

Mr Niran said it was time to turn Phuket into a special economic zone so that local officials would have more budget to further develop all infrastructures, which currently do not match the increasing demand.

He also noted the limit of the governor’s power in budget disbursement, as Phuket is not yet a special administrative entity.

by Robert Carry (www.property-report.com)

According to a new report released by a leading real estate services firm, the profile of overseas investors buying into Phuket is changing rapidly.

Jones Lang LaSalle reported that whilst buyers from UK, US and the Scandinavian nations continue to generate the majority of demand, the demand base has been expanded by the increased interest of buyers from Russian, Middle Eastern and Asian countries.

Dan Tantisunthorn, the firm´s head of research in Thailand, “Unlike the urban centre of Bangkok where Thais represent a substantial portion of demand in most condominium projects, the resort market of Phuket attracts primarily foreign buyers, who avail condominium units on both freehold and leasehold terms.”

He continued, “While traditionally the bulk of these foreigners would be British, American or Scandinavian nationals, affluent individuals from China, Russia, India, Korea and the Middle Eastern countries are representing a growing source of demand. This trend is reflective of the growth in the number of tourists from these markets.”

The report also found that the high-end and luxury condominium market in Phuket reported strong sales over the high tourism season in 2008. “Outlook for the Phuket high-end and luxury condominium market remains promising. The growing reputation of Phuket as one of the world’s top resort destinations will continue to attract buyers from around the world looking for a holiday or retirement home overseas.

“Moreover, the new government has expressed its strong will to attract more overseas capital flows into Thailand. The cancellation of the 30 per cent reserve on foreign capital investments is a positive sign. In addition, the Thai Finance Minister, Dr Surapong Suebwonglee, was recently quoted as saying the Thai government was considering to extend land leasehold periods. This is good news for the Phuket market. Should the initiative materialise, we can expect the market to be more robust,” Dan concluded.

by Meagan Kelly (www.property-report.com)

Asian real estate investment firm Pacific Star International plans to bring in as much as US $400 million in foreign funds to Thailand.

The company has four real estate projects already underway in the country, and is studying two to three new deals to be made within the year.

Daniel Ross, vice-president for business development, says foreigners have expressed increased interest in Thailand’s property market.

“They are global financial institutions, banks and insurance companies, who aim high and are happy to invest here. Investing in Thai properties could produce an internal rate of return of 15%,” he said.

Its Singapore-based parent company, Pacific Star Group, manages five property funds including the US $250 million Asia Real Estate Prime Development Fund. The group had originally allocated 10 per cent of total assets to Thailand. That restriction is being loosened and the fund size could now jump to US $400 million.

Ross says the company is hoping to create new hospitality projects in prime destinations like Samui and Phuket, where wealthy Middle Eastern investors are looking to buy beach front property.

“Thailand is very beautiful and when they (foreigners) stay here they feel safe. Your politics is stable when compared to other countries in this region,” he said.

Pacific Star International’s current projects include a 41-storey condominium complex in Sathorn, and 195 unit mixed-use luxury development Eight Thong Lor.  The company also has partnered with Asia Property Development on two developments that will begin selling in the third quarter of this year.

By Property-Report.com

The nomination stage of the 2008 Thailand Property Awards has proved to be active with many new businesses and projects being nominated for one of the prestigious awards.

The 2008 Thailand Property Awards has introduced a number of new categories, and broken down Best Villa Development and Best Condo Development awards into specific areas so judging will be more  like-for-like. Awards include:

DEVELOPER
Best Developer
Best Boutique Developer

REAL ESTATE AGENCY
Best International Agent
Best Thailand Agent

DEVELOPMENT
Best Villa Development (Bangkok)
Best Villa Development (Phuket)
Best Villa Development (Eastern Seaboard)
Best Villa Development (Samui)
Best Villa Development (Hua Hin)
Best Condo Development (Bangkok)
Best Condo Development (Phuket)
Best Condo Development (Eastern Seaboard)
Best Condo Development (Samui)
Best Condo Development (Hua Hin)
Green Development Award

ARCHITECT/INTERIOR DESIGN
Best Architect
Best Interior Designer

MARKETING
Best Agent Website
Best Development Website
Best Print Advertisement

Similar to 2007, there are 3 stages to the entry and judging procedure.

Stage One: Nomination – members of the real estate industry and support industries nominate businesses/projects to respective categories. This can be done online through the official website or on official forms provided by the organisers by email or fax. No points are allocated at the nomination stage.

Stage Two: Entry – all nominated businesses/projects are then catalogued in the presence of BDO Richfield Advisory Limited and each is then contacted by the organisers, provided with an entry form and asked to complete and send back, via email. Once entries have closed, all entry submissions will be catalogued and checked against the award eligibility criteria in the presence of BDO Richfield Advisory Limited.

Stage Three: Judging – this year the judging is split into two parts. All entries will be judged by a team of anonymous judges sourced from the real estate industry nationwide. There will be no discussions among judges and each judge will allocate points against specific judging criteria, and submit final scoring sheets direct to BDO Richfield Advisory Limited who will calculate the scores. Total scores for each entry will be divided by the number of judges who scored that entry and the one with the highest score will be the winner.

In the case of the Development awards, the top five scoring developments in each category will be short-listed. A 3-5 person team will then visit each of the short-listed developments. A face-to-face meeting with project senior executives and a site inspection will be undertaken, after which the judges will meet privately to discuss the merits of each development, with a representative of BDO Richfield Advisory Limited present. After all short-listed entrants have been visited, the judges will together decide upon the winner and submit to BDO Richfield Advisory Limited. There will be separate teams for judging developments in Bangkok, Phuket, Eastern Seaboard, Samui and Hua Hin, and the judges will use local knowledge as well as information from the site visit and entry form in their decision-making. The 3-5 person team will be announced once entries have been completed and submitted.

In the case of the Green Development Award, up to the two highest scoring entries from each of Bangkok, Phuket, Eastern Seaboard, Samui and Hua Hin will be visited by their respective local judging team in the same way as above. Final scores for each will be submitted direct to BDO Richfield Advisory Limited, and the development with the highest score will be the winner.

A major development for the 2008 awards is the inclusion of site visits in the judging process for the Development awards, and the engagement of BDO Richfield Advisory Limited – a member of the BDO global network – to supervise the entire nomination, entry and judging process and ensure all is fair and transparent.

The award winners will be announced at a lavish gala dinner on 15th November at the Conrad Hotel in Bangkok.