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Land plots in Bangkok’s prime locations are in high demand from both large developers and non-property investors jumping into the business, leading to prices soaring 15% a year on average. Kulwadee Sawangsri, executive director for investment and land services at the property consultant CB Richard Ellis (Thailand) or CBRE, said demand is so high because buyers want to develop condominiums, offices and private homes.
Some want to buy land and keep it for capital gains in the future and think there are no expenses when holding a plot. But on the contrary, owning a condo or a house entails expenses such as for common areas or maintenance fees. “Land investment generates the highest yield among all property categories,” Mrs Kulwadee said. Many people who have cash in hand prefer investing in land, as year-on-year yields are about 15%.
For income-producing property, 4-5% a year is the norm
She said more non-developer investors are buying land each year. Many are second-generation children of a business owner and want to challenge themselves with another business. Despite limited experience in property, most are well educated and conduct projects professionally. “A trend of land purchase has emerged since the collapse of the investment bank giant Lehman Brothers in 2008,” Mrs Kulwadee said. The US-based financial firm had many assets in Thailand including office buildings, land and hotels.
The last piece in Bangkok that Lehman Brothers sold was the Mercury Tower office building on the corner of Lang Suan and Phloenchit roads The property was sold to the Singaporean investor Real Estate Capital Asia Partners last year for 1.2 billion baht.
Mrs Kulwadee said the highest increase in land prices over the past decade has been in the Sukhumvit area between Phloenchit Road and Soi Thong Lor (Sukhumvit Soi 55), where demand is very high.
The average land price in this area soared 340% from 2003 to 1.35 million a square wah last year
Next was the Silom and Sathon area, rising by 330% to 1.2 million baht per sq w in the same period. The turning point was the British embassy’s plot, which was sold for 900,000 baht per sq w in 2006 _ much higher than market prices of 600,000 to 700,000 baht at the time, said Mrs Kulwadee.
However, even the increase in average land prices in inner Bangkok of 15% in a single year was lower than that in the hottest location, Khao Yai in Nakhon Ratchasima province, where CBRE saw an increase of up to 50% last year.
Even in Bangkok’s outskirts such as the Bang Kae, Rattanathibet and Chaeng Watthana areas, land prices have soared 40-50%, driven by construction progress of mass transit lines. To invest in land, Mrs Kulwadee suggests a prime location is the first priority, followed by main roads, shape and the city plan, which may limit project development if it is changed in May. CBRE last year recorded 8 billion baht from 30 land transactions, up from 15 transactions worth 3 billion baht in 2011. Demand drives city land price by 15% | Bangkok Post: business