Connect with us

Real Estate

Condominium Developers Diversify into Recurring Income Properties

A slowdown in the condominium market has encouraged major residential developers to consider diversifying their portfolio into other property sectors such as office, hotel, and serviced apartment.

Avatar

Published

on

The recent restrictive measures from the Bank of Thailand (BOT) have continued to cast a shadow over Bangkok’s condominium market since the beginning of this year.

Condominium sales have dropped, putting pressure on developer’s financial targets. Some developers have sought to diversify their risk in pure residential development projects for sale by seeking to develop alternative sources of revenue from recurring income properties. 

Growing concerns about excessive residential mortgage lending by commercial banks prompted the BOT to reduce loan-to-value ratios (LTV ratios) for second and subsequent home mortgages starting from 1st April 2019. CBRE believes the new measures have significantly reduced the number of speculative buyers and buy-to-rent investors of residential condominium units.

A slowdown in the condominium market has encouraged major residential developers to consider diversifying their portfolios into other property sectors such as office, hotel, and serviced apartments.

Most of these companies are listed on the Stock Exchange of Thailand and their financial performance is regularly accessed. With stable recurring income, they are better able to offset the volatility in revenues from the residential-for-sale market as well as sustain revenue and profit growth.

“We have seen an increase in both the number of landowners willing to lease land for the long term and the number of developers who are looking to develop leasehold land projects,”

Ms. Kulwadee Sawangsri, Executive Director and Head of Capital Markets – Investment & Land, CBRE Thailand. 

“Over the last 4 years, CBRE has completed nine long lease land transactions worth more than THB 10 billion. With the forthcoming changes in the new Land and Building Tax whereby landowners will have to pay significant tax on vacant land, we expect that more high-quality land will become available for long term rent,” Ms. Kulwadee added.

Ananda Development and Origin Property have both shown strong interest in the hospitality sector after Thailand welcomed a record-breaking 38.27 million tourist arrivals in 2018, an increase of 7.5% Y-o-Y. Both companies have announced plans to develop several hotels and serviced apartments in Bangkok and the Eastern Economic Corridor

Ananda Development has partnered with Ascott Limited to develop five serviced apartments valued at THB 12 billion, four of which will be located in Bangkok and one in Pattaya. The company has also purchased 42.5 million shares equivalent to 5% in Dusit Thani, a leading Thai hospitality company. 

On the other hand, Origin Property set up a new subsidiary, One Origin, to invest up to THB 20 billion into recurring income properties in the next five years. Previously, the company has signed a management contract agreement with InterContinental Hotels Group to manage three hotels in Bangkok and Sriracha, expected to be operational within 2021.

Even the mass market developer, L.P.N. Development, has formed a joint venture with Nye Estate, to develop an office tower on a leasehold site on Rama IV Road, worth THB 3.79 billion. The company has been struggling to get a foothold over the past few years since purchasing power in the mass market has become weaker and buyers are much more vulnerable to mortgage rejection by banks.

Nye Estate is also developing Silom Square, another office building on a 50-year leasehold plot located on the corner of Silom and Convent Roads. The company previously developed purely residential projects before entering the office market in 2016.

Raimon Land is another company to have jumped into the recurring income business after signing a 30-year lease for a prime 6-rai plot located on Ploenchit Road opposite Central Embassy.

The company has recently started piling on the site to be developed into a 52-storey office building with net leasable space of approximately 65,000 square meters with an investment of THB 11.5 billion. The company also has future plans to develop a 250-key hotel on Sukhumvit Road.

CBRE believes that developers need to plan their diversification strategies wisely. They must have a strong team with sound knowledge of operations and understanding of market dynamics in the property sector they are venturing into.

An article written by Pattaratorn Pornsirikul, a senior analyst, at Research and Consulting, CBRE Thailand for Bangkok Post dated 15 May 2019.

Source link

Continue Reading
Advertisement
Comments

Real Estate

Asia Pacific to outperform other regions in 2020 for real estate investment

Investment in Asia Pacific real estate has reached US$125 billion in the first three quarters of 2019, up 10 per cent year-on-year, and is set for another strong year in 2020, says JLL.

Avatar

Published

on

According to the real estate consultancy, foreign investments into Asia Pacific are at a decade-high, making up 35 per cent of total volumes, mostly driven by private equity funds and large-scale transactions.

(more…)

Continue Reading

Investment

Asia Pacific REITs raise a record amount of US$14 billion in 2019

REITs in APAC have raised over US$14 billion so far in 2019, surpassing the previous record of US$13.8 billion in 2013, according to JLL data.

Bahar Karaman

Published

on

Real Estate Investment Trusts (REITs) in the Asia Pacific region have raised a record amount of capital this year, as investors sought more defensive, yield-based stocks amid growing global economic and political uncertainty.

(more…)

Continue Reading

Real Estate

Land and Property Tax Forces Site Owners to Consider Options

The new Land and Property Tax, which will be effective from January 2020 onward, is another challenge for the Thai property market.

CBRE Thailand

Published

on

The new Land and Property Tax which will be effective from January 2020 onward, is another challenge for the Thai property market. 

(more…)

Continue Reading

Most Read

Upcoming Events

Thu 23

12th World Congress on Alzheimers Disease & Dementia

January 23 @ 9:00 am - January 24 @ 5:00 pm BMT
Feb 12

Future Energy Asia

February 12 - February 14
BITEC
Bangkok
Feb 19

13th World Congress on Nursing and Health Care

February 19 @ 9:00 am - February 20 @ 5:00 pm BMT
Phuket
Phuket city
Mar 11

Food science conferences

March 11 @ 8:00 am - March 12 @ 5:00 pm BMT
Mar 11

Food science conferences

March 11 @ 9:00 am - March 12 @ 5:00 pm BMT

Press Release

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 12,058 other subscribers

Trending