Bangkok--Apr 20--CB Richard
The property market in Thailand is rapidly changing and becoming more mature, according to international property consultants CB Richard Ellis.
Historically there has been only limited trading of income producing properties. However, CB Richard Ellis believes that this will change with the growth of property funds in Thailand.
According to Ms. Kulwadee Sawangsri, Director-Head of Investment and Land Services at CB Richard Ellis, “This is a very positive move forward for the Thai property market as it provides a greater degree of liquidity”.
In the past, developers would construct properties for rent, but never sell them on to another investor. The majority of significant property transactions have normally occurred because the original property developer encountered financial problems and was therefore a reluctant seller.
The development market was extremely fragmented with no sizeable developers; many properties were one-off developments owned by companies whose core business was not property. Investors found it almost impossible to acquire an income producing property unless they constructed one themselves.
However, with the growth of property funds over the last few years the situation has been changing.
The concept of the property fund was introduced to Thailand to provide liquidity in the property market following the 1997 financial crisis. There are two main types of property fund, non-listed funds such as the Government Pension Fund and listed funds such as the Millionaire Property Fund. The funds are also tax efficient which provides an added incentive.
Property funds have similar characteristics to income earning properties in that they provide investors with a steady income stream and the possibility of capital gains as asset prices rise. Publicly listed funds increase investors’ exposure to the property market. Previously investors could either own shares in listed developers, the majority of whom were residential developers rather than income producing property owners, or engage in direct investment by acquiring actual property assets.
Investors now have the advantage of exposure to income producing properties with the benefits of liquidity and low trading costs provided by a public listing.
The latest property fund model is a Type 1 fund, to be listed on the Stock Exchange of Thailand. The characteristics of this fund are that they be closed end and invest 75% of their net assets in property. At least 90% of the net profits must be paid to investors as dividends.
The developer can thus retain a share of the property without the disadvantages of converting the property into a multi-ownership condominium, and are essentially securing the asset by providing additional funds for new developments rather than relying on bank funding. As a result, developers of income producing property now have more flexibility and a number have set up, or are planning to set up, funds into which they will transfer properties.
The emergence of property funds is similar to Real Estate Investment Trusts which are growing throughout Asia as markets become more international.
CB Richard Ellis believes that institutional funds will become the largest buyers of income producing property in Thailand.
With the changing profile of buyers from traditional investors to property funds, investors will want to diversify and distribute their exposure among several property sectors. Thus, more investments will be made in the retail, office and industrial sectors because of attractive yields and rental income stability.
There will be a greater focus on the quality of rental income where investors want to be sure that the yield they receive today is sustainable. There will be also be a focus on property management costs so that dividends are maximized while maintaining the attractiveness of the property.
Ms. Kulwadee concluded that “Thailand is in the early stages of maturing as a property investment market. We expect this situation to continue and that the market will become more sophisticated. CB Richard Ellis is the world’s leading broker of investment properties and, in 2004, the firm sold 9,900 properties with a total transaction value of 87.2 billion US dollars.
We believe that CB Richard Ellis is ideally positioned to advise property investors in Thailand, because of the depth of our market knowledge and our global experience”.
About CB Richard Ellis
Headquartered in Los Angeles, CB Richard Ellis is a leading global real estate services firm. With more than 17,000* employees, the company serves real estate owners, investors and occupiers through 300 principal offices worldwide. The company’s core services include property sales, leasing and management; corporate services; facilities and project management; mortgage banking; investment management; capital markets; appraisal and valuation; research and consulting. CB Richard Ellis is a public company, listed on the New York Stock Exchange under the symbol CBG.
CB Richard Ellis established an office in Bangkok in 1988 and in Phuket in 2004. CB Richard Ellis (Thailand) Co., Ltd. has grown to be a leading real estate services provider, offering a full range of services including sales and leasing for all types of property, property and facilities management, valuation and advisory services, and research and consulting. For more information, visit the company's website at www.cbre.co.th.
* Includes partner offices
For further information:
Mr. James Pitchon
Executive Director
02 654 1111
Ms. Kulwadee Sawangsri
Director — Head of Investment & Land
02 654 1111 ext. 301
Ms. Ngamjai Jearrajarat
Corporate Communications Manager
02 654 1111 Ext. 522 End.