Prices of prime residential land in Bangkok rocketed by more than 190 percent during the last two years, ranking Thailand’s capital at the top of Knight Frank Asia-Pacific’s Prime Asia Development Land Index.
Knight Frank Asia Pacific launched its first-ever Prime Asia Development Land Index which derives the price of prime residential (apartment or condominium) and commercial (office) development land in 13 major cities across Asia, for the period December 2011 to December 2013.
The land prices in the Index are derived using a repeat residual valuation methodology where Knight Frank essentially looks at what a reasonable developer would be expected to pay for development land, given the gross development value of the potential scheme, costs (construction, professional, contingencies, and financial), required profit, acquisition costs and relevant taxes.
“A key observation from our findings points to the fact that in developing Asia we are seeing low liquidity and rapid land price appreciation, whilst in developed Asia such as Hong Kong, Singapore and Tokyo, we see the highest land prices and redevelopment opportunities. In these mature markets, the lack of prime development land has led to more emphasis on redevelopment opportunities, while given the higher cost of land and in some cases high holding taxes, there is often more pressure to develop quickly.”
says Mr Nicholas Holt, Head of Research for Asia Pacific
For each of the 13 markets, a number of prime sites have been selected for the exercise. These are existing sites within the prime districts of the market including recently transacted land plot or a plot that is currently on the market, however most importantly, these sites accurately represent the prime development market for each sector.
Key highlights of the Prime Asia Development Land Index:
• The results show that in the two years from December 2011, 24 of the 26 markets tracked (13 residential and 13 office) saw an increase in their indices reflecting increasing prime land prices amid tight supply and strong demand.
• Prime Asia residential and office development land indices increased 50.4% and 38.3% respectively over the last two years.
• Southeast Asian markets see the fastest price growth for prime development land: Bangkok, Jakarta, Kuala Lumpur and Phnom Penh make up 4 of top 5 cities in terms of price growth.
• The mature markets of Hong Kong, Singapore and Tokyo saw the lowest price growth.
• With competition for prime development sites remaining as strong as ever, increasing numbers of developers and investors are looking overseas for opportunities. Evident from a 55% YOY increase in intra-Asian cross-border developments driving price growth in development land.
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