One of the fastest growing areas in the Thai property market is branded condominium developments. Recent examples of similar projects in Singapore where returns were up to 50% greater than for non-branded developments have inspired the Thai market. Growing numbers of tourism makes these developments very promising ventures, and the Thai government’s newly de-regulated property sector is also having a favorable effect on developments like these. In the related industry of luxury housing, there have also been large projects announced recently in Thailand by Magnolia Quality Development Co, to create large luxury housing estates and condominiums.
Thailand recently emerged onto the global property market after over 15 years of military rule and very tight controls on property ownership by foreigners. The new Thai government wants to motivate investors to put their money into the country, and so has reduced the transfer fee on properties from 2% to 0.01% until the end of March 2009. On multimillion dollar construction projects like branded hotels, this makes quite an impact on the net profit. In addition, the specific business tax has been reduced from 3% to 0,01% for the same period of time.
However, it is not only due to tax cuts that branded hotels and resort properties are becoming hot items in Thailand’s property sector. Across all of Asia, five star hotel brands are working in conjunction with developers and owners to boost the availability of luxury accommodation. It is attributed to the confidence that branded resorts inspire in investors. Projects are generally meticulously and expertly planned, by people with experience in similar successful projects overseas. Hotels and resorts with a strong track record are finding that property investment in Thailand, and in Asia generally, can yield especially high returns. In Singapore recently, a brand name condo development sold for $4,000 per square meter, as opposed to the $2,500 that such a development without a brand name usually fetches.
In a property environment where many more projects are announced than completed, brand name resorts make investors feel more secure. It offers them some measure of assurance that a project will not only be built, it will be finished to a certain standard and will come with some ready-made customers, as global visitors look for resorts and hotels where they know what to expect.
One of the first developments in Thailand to take advantage of such premium prices for luxury condos is Magnolia Quality Development Co, which will develop both single houses and condominiums under the brands of Baan Magnolia, WHIZ.dom, and Eco Village. The six projects to be launched will be worth around 10 billion baht. One of these is the Baan Magnolia 4 true Eco Park, which will include residential units, a resort and a hotel. They are hoping to cash in on the current boom in branded resorts. A spokesman for the company said they would be focusing on quality products to ensure strong sales, rather than lowering prices to attract more customers.
These developments by Magnolia should also have an increased profit margin, as costs have been cut by shortening the cycle from design to completion by a huge 30-50%. They are confident of having investors, and now only have to choose which of the potentials will come on board.
Tourism in Thailand is set to increase by 20% per year, owing to the prevalence of extremely cheap stop over flights, as compared to the relatively expensive direct flights. Thailand’s unique geographical position gives it an advantage for the tourism sector. Its extensive natural attractions, along with the relative inexpense of local facilities (compared to in Europe and America) ensure that resorts, five star hotels and luxury accommodation will always find customers.
Overall, the resort property market in Thailand looks set to grow, especially where branded developments are concerned.
Gregory Smyth is an independent author providing assessment and comments on leading International Property Consultants in Asia and Greater China, especially CB Richard Ellis - http://www.cbre.com.hk
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