Chinese Investment in Electric Vehicle Industry Drives Land Prices in EEC "Rayong" Up by 31.6%

Real Estate Information Center, Government Housing Bank (REIC) has been monitoring changes in the prices of vacant land prior to development in the EEC (Eastern Economic Corridor) area, which includes Chonburi, Rayong, and Chachoengsao provinces, using 2015 as the base year for the index. This year was chosen because it was when REIC received comprehensive data on the transfer of vacant land ownership from the Land Department, and it was a year without special factors that could disrupt the overall economic picture of the country and the EEC area.

In creating the index for vacant land prices before development in the EEC area, data on the transfer of vacant land ownership from the Land Department was utilized, selecting only land without buildings, with sizes starting from 200 square wah and using transfer data where either the “transferor” or “transferee” is a “juristic person.” This is because companies usually report the actual sale prices accurately. The index calculation used the Chain Laspeyres analysis method, with the average price per square wah weighted by the value of land ownership transfers in the three EEC provinces from 2015 to 2019. The factors analyzed through multiple regression analysis included 1. the location of the land and 2. the land use plan.

Dr. Vichai Wiratthakhan, Inspector of the Government Housing Bank and Acting Director of the Real Estate Information Center stated that the index for vacant land prices before development in the EEC area in Q2 of 2024 stands at 281.5 points, an increase of 8.3% compared to the same period last year (YoY) and up 5.9% compared to the previous quarter (QoQ). This indicates that the growth of vacant land prices before development continues to rise, although at a slowing rate compared to the average increase of 14.0% per quarter in the five years before COVID-19 (2015 – 2019) when compared to the same period last year (YoY).

The increase in vacant land prices before development is slowing down, possibly due to developers' declining interest in acquiring land for real estate projects, influenced by the slow recovery of the domestic economy and investment in recent times. Negative factors include the cancellation of LTV relaxation measures, high household debt exceeding 90% of GDP, and a stable policy interest rate at 2.50%. Those looking to buy homes face increased costs but reduced purchasing power, leading to a significant slowdown in the real estate sector, resulting in decreased demand for land acquisition by developers.

Additionally, the cost of holding land has increased due to land and building tax payments. In 2024, the government has no measures to reduce land and building taxes, leading to a general slowdown in land demand in the EEC area. Furthermore, much of the land remains agricultural and is not suitable for residential development, while another portion is designated for industrial estate development.

The index for vacant land prices before development in the EEC area in Q2 of 2024 has increased due to the land prices in Rayong province, which have an index value of 230.8 points, showing the highest change rate of 22.9% compared to the same period last year (YoY) and an increase of 31.6% compared to the previous quarter (QoQ). This is attributed to Chinese investors purchasing land to build factories related to the electric vehicle industry, such as battery and charging stations, in industrial estates in Rayong. Major electric vehicle manufacturers from China, such as BYD and Changan, are investing in the Rayong industrial estate, particularly in the Pluak Daeng development area, causing land prices to rise approximately 2.3 times compared to 2015, the base year (100.0 points). Investors prefer to invest in Rayong over Chonburi due to land prices in Rayong being about 30-40% lower than in Chonburi.

Following this, Chonburi province has an index value of 332.0 points, with a change rate of 5.0% compared to the same period last year (YoY), but a decrease of -2.5% compared to the previous quarter (QoQ). Chachoengsao province has an index value of 203.5 points, with a change rate decrease of -2.7% YoY, but an increase of 12.7% QoQ.

In Q2 of 2024, the top five areas with the highest land price growth rates compared to the same period last year (YoY) are as follows (see Table 2):

1. Ban Chang District in Rayong Province has seen a price increase of 52.5%. This district has a diverse transportation system, including several highways, access to the eastern railway, and U-Tapao Airport, making it suitable for residential project development. Local and Bangkok-based developers are interested in purchasing land in this area for residential projects to accommodate the workforce in industrial estates and tourism.