Property sector looks set to prosper in 2008

Market buoyed by profit potential, removal of 30% requirement.

Foreign investors are expected to invest up to Bt70 billion in the Thai property sector this year, following the lifting of the Bank of Thailand’s 30-per-cent capital reserve requirement.

Retail, office, serviced apartment, hotel and resort properties in Thailand are now being sought by real estate investment trusts and property firms from the United Kingdom, the United States, the Middle East, Japan and Australia.

According to research by international property agency Colliers International, investor confidence in Asian property investment has risen, with strong interest focused on Thailand. Following the removal of the capital reserve requirement, Thai assets have become more attractive, with the potential to generate annual returns of 20 per cent or more.

As a result, the agency says foreign investment will likely double from that of last year, which saw capital inflows of around Bt30 billion into Thailand’s property sector.

Colliers International says potential investors include Australia-based Macquarie Global Property Advisors, Japan-based Asian Partnership Fund Group, Dubai Investment Group, Kingdom Hotel Investment and pension and property funds from the Middle East, the UK and Scandinavia.

Already, the Asian Partnership Fund Group, from Japan, has formed a joint venture with the Mitr Phol Group to invest Bt630 million in the Zeavola Hotel on Koh Phi Phi in Krabi province.

Last week, the Australian property management firm Macquarie Global Property Advisers recommended to property investor MGP Hazel (Mauritius) No 1 that it buy 130 million shares in property development newcomer Siam2you, for investment in the Thai property sector.

David Faulkner, regional director of valuation and advisory services for Asia at Colliers International (Hong Kong), said Thailand was more attractive to foreign investors than Vietnam, where land values are expected to rise 30-40 per cent per this year, making it difficult to generate a high return on investment.

“In Thailand, land valuation has increased only 15 per cent this year, so there is room to generate a high return,” he said.

Colliers International (Thailand) managing director Patima Jeerapaet said commercial properties including retail space, serviced apartments and office buildings in Bangkok were among those being sought by foreign investors.
Hotels and resorts at tourist destination like Phuket, Hua Hin, Pattaya and Koh Samui are also attractive to foreign investors, many of whom plan to set up joint ventures with local partners.

Patima said investors were more interested in the property market in Thailand and other Asian countries following the sub-prime mortgage crisis in the US, where property values in some areas have fallen by as much as 50 per cent.

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John John Scott
John has been involved in various businesses throughout South East Asia for the past twenty years.
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