If Not China, Then Which Foreign Country?

Creating 'Options' Before Running Out of 'Survival' in the Real Estate Business (Part 1)


             The seminar titled FIND YOUR RISK, DARE TO NICHE 2030: Creating 'Options' Before Running Out of 'Survival' in the Real Estate Business was successfully concluded on February 23, 2019. The TerraBKK Research team gathered insights to open up experiences in the real estate business, creating 'Options' before running out of 'Survival', while also projecting views towards 2030. Notable speakers included Cory M. Ticktin, an architect and designer with over 34 years of global design experience, as well as leading organizations in Thailand such as Chulalongkorn University, SCG Cement Co., Ltd., and Builk One Group.


             Don't wait any longer! The TerraBKK team has summarized the key points from the event for everyone to read:


DOWN TO RISE: Creating 'New Options' (MARKET OUTLOOK)


           In 2019, the overall real estate market is slowing down due to the rising debt situation among Thais and the continuously increasing household debt ratio. A significant impact on the real estate sector comes from the LTV measures, with stricter loan assessment criteria affecting 'second homes' and homes priced over 10 million baht. It is clear that first-time homebuyers with properties priced below 10 million baht may be a crucial solution for operators this year. Meanwhile, the banking sector's adjustments, such as a 0.25% increase in interest rates, have raised home loan costs by 2%, and the reduction of the DTI (debt-to-income) ratio from 60-70% to 50% has made it even harder for borrowers to secure loans.



           TerraBKK Research found that the average income of people in the Bangkok metropolitan area has increased by an average of 4% per year over the past 15 years, while housing prices in Bangkok and its vicinity have not aligned with income growth, particularly condominiums, which have seen an increase of about 9% per year.

            The adjustment of real estate operators in 2019 shows a decline in the number of new project launches and project values among six major brands. For example, 'Pruksa' is focusing on townhouses and launching a new premium brand priced between 3-5 million baht, along with a portfolio of condominiums priced between 5-10 million baht. Meanwhile, 'Land and Houses' has confirmed that it will not undertake condominium projects this year. 'Sansiri' has announced plans for 'The Year of Low Rise Market Expansion', focusing on affordable housing. Even 'Origin' continues to expand its housing portfolio in the 2.5-6 million baht range. For 'Ananda', a well-known brand in high-rise developments, there has been a reduction in project launches but an increase in value, focusing on condominiums priced at 150,000 baht per square meter and above, while continuously promoting stock clearance. 'LPN' is also expanding its housing portfolio and moving forward to create income channels through service providers.



              Thailand continues to attract foreign investment opportunities. Recently, the FDI figures for 2018 show that foreigners invested more in Thailand than they withdrew, with 'Japan' being the country with the highest investment in Thailand, reaching 111 billion baht, followed by Singapore and Taiwan. From the foreign perspective, Thailand stands out in terms of International Outreach, ranking 7th in the world (cities in motion statistics 2014-2018 for IESE).



              Chinese buyers have become the largest group of foreign property purchasers in Thailand for three consecutive years. In 2017, 27% of the total value of condominium ownership transfers belonged to foreigners, with Chinese buyers accounting for one-third of the total transfers. The main reasons likely stem from internal factors in China, such as governance, air pollution, high property prices, and the ease of doing business. Thus, Thai real estate appears attractive with an average price of 123,540 baht per square meter, significantly lower than 369,775 baht per square meter in China. However, as we know, the Chinese economy is not performing well, coupled with measures to control the outflow of money for purchasing foreign properties, which will also impact Thai real estate.



            The question is, If Not China, Then Which Foreign Country? TerraBKK Research believes that 'India is the new rising market' could be a possibility, given India's population of 1.36 billion people, nearly comparable to China, and the projected GDP leap from 7th in the world in 2018 to 5th in 2023 and 2nd in 2050. This is quite interesting, and Indians seem to resonate well with Thailand. According to tourism statistics for Thailand in 2018, the number of Indian tourists increased by 12.8%, and tourist revenue grew by 30.6% from the previous year.

           

                   Looking back at Thailand, we are currently at a point where growth is expanding across the country, thanks to the high-speed rail network. In the future, 'Bangkokians' will only take 3.43 hours to reach 'Chiang Mai' in the north or 2.13 hours to get to 'Khon Kaen' in the northeast, and 'Bangkok-Rayong' will only be 1.06 hours away. This presents new opportunities that real estate operators must seriously consider. At the same time, if we look at the income figures of the population in the provinces along these high-speed rail routes, Bangkok, Rayong, Chonburi, Nonthaburi, and Nakhon Pathom are five provinces that are particularly interesting.


             If we are still committed to developing housing in Bangkok, let's take a look at how hot the housing market in Bangkok was last year. Through TerraByte App , an application from TerraBKK that helps real estate operators analyze the housing market more easily.

             In 2018, there was a 12% increase in the launch of condominiums compared to 2017, and prices have moved into the 100,000-150,000 baht per square meter segment, becoming a larger proportion. When examining which locations were the hottest ... 'Phahonyothin-Sena Nikhom' is the hottest location crossing over the years, benefiting from the extension of the northern green line and the rail system taking shape, leading many operators to launch over 4,000 condominium units. In 2019, based on the announcements of new condominium launches, TerraByte has found that 'Ramkhamhaeng-Nawamin' is set to be a hot location in early 2019, as most of the launched projects are large-scale, with over a thousand units, and many more projects are set to launch.


            In the landed property market, TerraBKK sees that 'townhomes and duplex houses' will be noteworthy this year, as the prices of single-family homes are beyond the purchasing power of buyers. Townhomes and duplex houses will become substitutes for condominiums and single-family homes, with the supply of townhomes increasing while the launch of single-family homes decreases. The popular locations for landed properties remain 'Samut Prakan' and 'Pathum Thani', but when considering demand, 'Pathum Thani' is a zone of concern due to the high remaining supply.


           TerraBKK believes that Bangkok still has opportunities for growth, but caution is needed in specific zones, as well as opportunities arising from various Mega Projects from both the public and private sectors, such as the Makkasan Complex, Phahonyothin Transportation Hub, Klong Toey Port, and other large-scale mixed-use projects. This is a situation to watch closely for Bangkok. For those interested, the 'TerraBYTE' application can be explored in detail at http://bit.ly/2Hic9yu.