Bangkok market remained robust despite political turbulance

Despite the political turbulence, investment activity in the Bangkok real estate market remained robust during the first half of 2010.

While the low interest environment encouraged more investors to seek alternative investment opportunities in real estate, property development firms continued to aggressively acquire land for new development, according to professional real estate services firm Jones Lang LaSalle.

Umpon Thepnumsommanus, Director of Investment at Jones Lang LaSalle, said: "For the past six months, investment activity in the Bangkok property market was buoyant. Investment transactions concluded by Jones Lang LaSalle alone on behalf of clients represent a combined value of THB3.5 billion (US$108.29 million) for the period. These include the sale of a portfolio of strata-titled office condominium units at Serm-Mit Tower for THB1.5 billion (US$46.41 million) in early 2010 and dispositions of a number of prime land plots."

There were a number of factors that drove investment activity in the first half of the year, according to Umpon. On the supply side, many corporations continued to restructure their asset portfolio by disposing their non-core assets.

On the demand side, while property developers bought more land for future developments, some investors remained keen to invest in income-generating assets such as office buildings, given the current low interest environment.

Another factor that contributed to the robust sales and acquisition activities was the narrower gap between the buyers’ and the sellers’ price expectations.

"As the political unrests that intensified between April and May softened investor sentiment, sellers adopted a more compromising approach with their asking prices, allowing faster sales transactions," Umpon said.

In addition, several sales in the second quarter were accelerated due to the expiration of the government’s property stimulus package. Many sellers became more flexible during the negotiation process in order to complete the sale and have the property transferred in time prior to the expiry of the property stimulus package on June 30.

Much of the real estate investment activity recorded in Bangkok during the past six months was acquisitions of land or sites for redevelopment purposes by property companies. Land plots located no farther than 200 meters from a BTS, MRT, or Airport Link station received exceptionally high interest.

Umpon explained: "Mid-priced condominiums with convenient access to mass transit systems have remained very popular as reflected by the fast sales rates achieved by many off-plan or newly launched projects in close proximity to mass transit systems. This has encouraged demand from property development companies for land with potential for condominium development."

He added: "The trend of property development companies securing prime land for condominium development will continue. The recent issuances of debentures by a number of major listed residential property developers such as Preuksa Real Estate, Supalai and Asian Property Development show that these companies have been well prepared for new investments."

Source: Property Report (July 14, 2010)