Phuket Realty

Thailand’s Land & Houses Q3 profits fall

Land & Houses, the largest builder of homes in Thailand, recorded a 32 percent fall in third-quarter net profit on Wednesday due to weak revenue after property tax incentives expired, Reuters has reported.

Land & Houses, 13.21 per cent of which is owned by the Government of Singapore Investment Corp, said its Q3 net profit was THB793 million ($26.84 million), or 0.08 baht per share, down from THB1.16 billion (US$39.2 million) a year earlier.

The result beat the average 670 million baht forecast by three analysts polled by Reuters.

Land & Houses builds homes mainly for the high-end and middle-class market and has the largest share of the market for detached houses. It is valued at US$2.3 billion on the Stock Exchange of Thailand.

Land & Houses’ shares increased 40 per cent in Q3, outperforming a 22 per cent gain in the broader Thai market.

 

Phuket Land Office sees increase in tax revenue

The Phuket Land Office collected THB1.3 billion (US$43.8 million) in land tax from October 2009 to September 2010, said head of the office Paitoon Lartkai.
“On average, we earn about four million baht a day.” he added.

The tax collected this year was THB430 million (US$14.3 million) over that of last year which totaled THB871 million (US$29.1 million). This represent an impressive 49% increase.

But does it really mean that the real estate market is getting better?

Of course, the number of transactions increased slightly compared with the precedent year (when it had fallen close to zero).
30,812 people registered land ownership and legal transactions, and the Phuket Land Office approved 12 housing projects with 1,000 units and 7 condominium projects with over 800 rooms in fiscal year 2010.

But if we go deeper than the surface, things are not so bright.

On one hand, the Land Office forgets here to mention a dramatic increase of the tax rates. The Special Business Tax went from 0.11% to 3.3%. The transfer of ownership fees were  mulitiplied by 200 since they went from 0.01% to 2% !
With this information the 49% increase in tax revenue seems weak and may reveal in fact a drop in the value of transactions. 

On the other hand, most of the new projects approved are projects designed by Thai companies offering very cheap housing (THB 1 to 3 million) to a Thai middle class that is still hypothetical and sold with a heavy dose of credit (which leads to a fear of a bubble on this particular segment of the market).

The Stock Exchange of Thailand breaks 900

 

SET index closed at 900.37, up 14.27 or 1.61% in trade worth 43.60 billion baht on Friday. It had not reached this level since October 2007.

 

 

 

Favorable datas are stimulating the Thai stock market.

Thailand's economy grew 9.1 percent in the June quarter, the National Economic and Social Development Board said on Monday. This was higher than analyst expectations for an 8 percent expansion, but slower than the 12 percent growth in the first three months of the year, which, by the way, was the best rate of growth in about 15 years.

It is estimated that GDP growth for the first half of 2010 will be approximately 10%. The global economy is improving, exports of both agricultural goods and industrial goods are rising, and benefits of free trade agreements are spurring trade. All of this has combined to lift Thailand to significant levels of economic growth coming out of the global recession. That momentum for higher growth continues unabated, as the Bank of Thailand recently raised its full-year 2010 growth forecast to between 6.5% and 7.5%, from its previous forecast of between 4.3% and 5.8%. In its July 2010 Inflation Report, the Bank observes that the “Main driving forces were exports and private investment, which expanded robustly in line with the global recovery.”

 

 

These good results reflect in the strength of the Thai Baht which gained nearly 25% against the Euro in one year.

In fact, the Thai currency has not been so healthy since the 1997 crisis.

Consequently, even if the rate of growth of the real estate sector is slow, combined with the strength of the Thai Baht, prices of properties are raising fast.
Take for example a villa bought 400,000 € (THB 20 million) in 2009, if its value increased by a modest 3% (inflation rate was 3.4% in July), it would cost today THB 20.6 million, or between 500,000 and 505,000 € !

Dusit Thani Laguna Phuket Sold THB 2.62 Billion

Leading Thai listed resort developer Laguna Resort and Hotels Plc. have disclosed to the Stock Exchange of Thailand (SET) a transaction of the Dusit Thani Laguna Phuket for an amount of THB 2.62 billion.
The buyer is Dusit Thani Public Company Limited. The transaction comes in at approximately USD81 million or USD358,000 a key, which, in terms of hotel valuations by several industry sources, is considered to be at the upper end of the scale.

The publically listed LRH detailed in the ‘Information Memorandum' on the divestment that the company had concerns over too much exposure in Thailand. As for the use of the proceeds this will be used to pay down debt, pay dividends and expand in investment abroad. It's thought that some of the funds will be used for the new Laguna Hue destination resort in Vietnam which the company is developing.

The 226 room upscale property was first opened in 1987 and was the first hotel developer K.P Ho built in what would become one of Asia's leading resort destinations - Laguna Phuket. 
Adjacent to the resort are 28 pool villas which are branded and operated by the chain but are individually owned.

According to information on the Laguna Resort and Hotels Plc. website the management agreement with the Dusit chain will expire in approximately 2 years hence the valuation on a premise of a relatively short term vacant possession generated greater market interest. This transaction marks the 3rd significant hospitality asset to be sold in Thailand this year. In Koh Samui Baan Taling Ngam traded to a Thai group and anther property in Phuket the Novotel Beach Resort in Panwa also went to a domestic buyer.

Real estate market trend in Phuket - 2009 Q4

Recovery started slowly since September. Deals concerned at first relatively small budget properties, i.e. under ฿5 million and are raising both in volume and frequency.

Particularely interesting is the increase in land deals mainly due to local speculators who are taking advantage of the tax cut in force untill March 28th, 2010 ; especialy the Special Business Tax reduced from 3.3% to 0.11% and the transfer fees down to 0.01% from 2%.

State of Play of 37 Phuket Development Projects

Original article : Phuket Wan Sept 9, 2009 

TWO OF 39 projects for Phuket have ceased development plans. They were Karon Heights Residence (15 plots) and a five-storey building intended to contain 79 rooms on Chaofa East Road. 

Another 37 projects are seeking approval. Here is what the governor's review panel decided: 

Agreement for Two Projects 

Surin Estate Condominiums (157 rooms) at Surin beach. 

The owner: RMTC Thailand 

The Lofts Resort at Laguna Phuket (95 rooms) 
The owner: Laguna Grand 
--- 

Agreement to Supply More Documentation 

Miracle Lake View (39 plots) at Chaofa Road West 
The owner: Chalong Miracle Lake View 

Supalai View (184 plots) Pa Klok, Thalang 
The owner: Supalai Ltd 
--- 
No Agreement on Developers' Report 

Dala Resort (202 rooms) Bang Tao beach 
The owner: Phudalew 

waste waster runoff remains an issue 
--- 

Agreement to Go Ahead 

Spectrum (44 rooms) at Cherng Thalay 
The owner: Spectrum Asia 

Mai Khao Dream Resort and Spa (22 villas) at Mai Khao 
The owner: Mai Khao Dream 

Chalong Interview Condominium (72 rooms) at Rawai 
The owner: Phuket Intervilla 

Baan Prapatsorn (76 plots) at Thalad Yai, Phuket City 
The owner: Layan Burin 

Four-storey building (27 rooms) at Kathu 
The owner Wiroj Phutong 

Litte Mermaid (40 rooms) at Karon 
The owner: Sudhujai 

Jhomtong (22 rooms) at Wichit, Phuket City 
The owner: Boonma Huber 

Rompattana (21 rooms) at Wichit, Phuket City 
The owner: Wantana Prachumpan 

Three-storey building (38 rooms) at Rassada 
The owner: Yuparat Ritmethree 

Juntamas Hotel (56 rooms) in Phuket City 
The owner: Juntamas 

The Cape Estates (17 houses) at Patong 
The owner: Kedsavilla Development 

Sun Peung Condo (64 rooms) at Patong 
The owner: Sun Peung 

Romsowan Apartments (26 rooms) at Patong 
The owner: Chakorn Sermtokul 

Vises Hotel (79 rooms) at Patong 
The owner: Pothiphumi 

Neptuna Hotel (79 rooms) at Patong 
The owner: Udomeak 

Four-storey building (16 rooms) at Phuket City 
The owner; Chulee Thanakit 

Thawasin Place (79 rooms) at Rassada 
The owner: Thawasin Place Committee 

Prompan Condotel (78 rooms) at Rassada 
The owner: Baan Prompan 

Prateep Project (69 rooms) at Kathu 
The owner: Prateep Reaksomroj 

Three-storey building (19 rooms) at Kathu 
The owner: Jaroon Prateep Na Thalang and Jaroi Prateep Na Thalang 

Sai Tong-Na Yai (30 plots) at Chalong 
The owner: Gold Future Development 

Poonsab project (78 rooms) at Chalong 
The owner: Phuket Shinawat Property 

Silver Palm Rawai project (51 rooms) at Rawai 
The owner: Phuket Boutique Development 

Two-storey building (18 rooms) at Rawai 
The owner: Surasak Subjui 

Kata Rocks (30 rooms) at Karon 
The owner: Kata Rocks 

Excavation project Kata Rocks 
The owner: Kata Rocks 

Pornsawat Project (36 rooms) at Karon 
The owner: Tantipornsawat Kata 

Natalee Place (19 rooms) at Karon 
The owner: Nattakah Chukhoawong 

Six-storey building (45 rooms) in Wichit, Phuket City 
The owner: Sanfanpoo 
--- 

Agreement With More Details Required 

IEE to be supplied 

Patcha Resort and Hotel ( 61 rooms) at Kamala 
The owner: Patong View Thalay Studio 

Four-storey building (20 rooms) at Cherng Thalay 
The owner: Puttirat Rattanakong 
--- 

Agreeement Not Reached 

EIA still required 

Marina, Taj Exotica Resort and Spa, Koh Lon, Rawai 
The owner: Taj Asia Thailand 

SIGNS OF RECOVERY IN THAILAND: Developers snap up land

Original article: The Nation August 31, 2009 

Confident that the country's economy is recovering, property firms have revised their investment plans to allow for the purchase of more land in the final four month of this year on expectations that prices will rise after a period of stability. 

According to a survey by The Nation, property firms including Preuksa Real Estate, Land & Houses, Sansiri, LPN Development, Noble Development and Asian Property Development have increased their investment budgets to buy land between now and the end of the year for the purpose of developing residential projects next year and in 2011, believing the economy will return to strength in 2010. 

Most are convinced that land prices are likely to rise after remaining flat since 2008. 

Land & Houses senior executive vice president Naporn Soonthornchitcharoen said the company has enough cash to revise its spending plans and buy land worth Bt3 billion to Bt4 billion by the end of the year. 

"When the government begins construction on the [next phase of the] mass-transit system, that will affect the property market, especially land prices in areas near the rail system, which will increase. So this is a good time to buy land," he said. 

Preuksa Real Estate director and chief operating officer Prasert Taedullyasatit said the company will buy another Bt3.5 billion to Bt5 billion worth of land this year for new projects to be launched this year and next, taking the firm's total from 22 to 30 projects. 

"We have seen signs of economic recovery since May, and believe this sentiment has sufficient momentum to drive demand in the residential market in the second half of this year. As a result, we've decided to collect land to support our business expansion in the last four months," he said. 

Noble Development president Thongchai Busrapan agreed that now is the time to buy. 

"We believe this is a good time to pick up land, before prices rise on an economic recovery and construction on the government's mega-projects - especially the rail system - gets underway," he said. 

According to a study by the Agency for Real Estate Affairs (AREA), the new rail system development will drive up land prices by between 20 per cent and 100 per cent, depending on the location and type of property. 

As an example of this process, he cited land prices on Silom Road, which have increased from Bt500,000 to Bt800,000 per square wah since the opening of the Skytrain in 2000. (One square wah is equal to 4 square metres.) 

The area around Times Square Building on Sukhumvit Rd has seen the strongest growth, rising from an average of Bt400,000 per square wah in 2005 to Bt750,000 now - an increase of nearly 97 per cent. The area near Soi Ekamai on Sukhumvit has seen prices rise an average of 89 per cent to Bt500,000 per square wah.

Revenue from Phuket real estate deals plummets

Phuket Gazette May 27, 2009 

PHUKET CITY: In an indication that the Phuket real estate market is not quite as robust as some like to suggest, statistics released by the Phuket Provincial Land Office reveal that income on land and property sales transactions was down over 70% year-on-year over the first four months of 2009. 

There were a total of 1,945 transactions involving land title deeds for the period from January to April. 

The total value of land transactions for the period was Bt883.24 billion baht, with the vast majority (Bt881.52bn) for land with pre-existing structures. 

Income from transactions from January to April 2008 totaled Bt333.5 million baht. 

Income for the same period this year was just Bt97.8m, down almost 71%. 

The largest reduction was in business tax collection, which is normally paid for by the seller at a cost of 3.3% of appraised value. This figure fell from Bt132.0m to Bt18.2m year-on-year. 

There was a similar downward trend in income from transfer fees, normally paid for by the buyer at 2% of registered value. These plummeted from Bt104.3m to Bt13.6m year-on-year. 

Withholding tax, paid for by the seller at 1% of appraised value, fell from Bt85.7m to Bt58.6m year-on-year. 

Stamp duty, paid for by the seller at 0.5% of registered value, fell from Bt11.6m to Bt7.5m. 

Property analyst Bill Barnett told the Gazette that the figures reflect a "wait and see" attitude on the part of Thai investors, many of whom speculate by buying several units at a time without the intention of living in them. 

Describing the figures as somewhat volatile, he cautioned that they are not a reliable yardstick for trends in the upscale villa market, where many sales are to foreigners on a leasehold basis or though offshore accounts, and thus not included in the Land Department figures. 
________________________

Real estate prices are falling in Phuket !

    Since the sub-primes bubble burst, Thai authorities keep churning out that Thailand - whose GDP depends for over 70% on exports and tourism - is immune to the economic crisis.

Now property prices are finally decreasing in Phuket.

Even if, officialy, prices are still increasing, in fact, everything is negotiable and some property owners have already reduced their asking price by as much as 45% !

    For example, this house, located in Rawai in the South of the island, which was initially advertised at THB 10.5 million ($ 315,000), has recently been sold for THB 5.9 million ($ 175,000). 

 

Another example is this 5-star hotel of 41 luxury villas, for sale at THB 380 million ($ 11.3 million), was advertised at $ 14 million one year ago.

But, it with property developers in difficulty that best bargains can be found.   
 

For example, this unachieved project in Cape Yamoo (click here for details) whose asked price dropped from  $ 1,790,000 (THB 60 million) to $ 1million (THB 35.4 million). The project includes 4 villas under construction and a land plot with services to build 3 additional villas. one of the 4 villas under construction is worth alone 40 millions Baht which would cover the asking price for the whole project.

Or the land plot of this 60 condos + 6 villas project in Bangtao (click for details), which was for sell on the basis of Baht 11,5 million per Rai (about $19 per sq.ft) is now priced at THB 10 million per Rai (about $16 per sq.ft).


In Botan Village, a 3,800 sq. ft villa was bought for THB 25 million ($715,000). The buyer was not able to come up with the money so the villa is back on the market at only THB 16 million ($335,000).

Then does it mean that we are in crisis?
For, even if there definetely are some good bargains at the moment, the downward trend has not become widespread yet. Especially the prices drop shown here tally the asking price of the properties not a loss compared with the price the property was previously bought.

    I will first list the negative arguments, which would cause a lasting drop in prices, then the positive arguments, which plead for a stabilization of the market; then I will try to forecast a trend for the short  / medium term.

1. Negative arguments
   
1. Political Instability:
   The conflict that broke out in 2006 has two consequences.
   First, it revealed the deficiency of the Thai legal system in protecting ownership rights especially in the real estate sector.
   Second, the sight of the airport held up by demonstrators gave fear that the country could go out of control.
2. The international crisis has repercussions on the Phuket market.
   Before, local banks did not offer loan to foreigners. Foreigners willing to purchase a proprerty in Thailand used to pay "cash", but with money that they borrowed to a bank in their country of origin; this loan was secured by the purchaser's personal assets. This is no more possible today.
   A Colliers International Thailand survey showed foreign purchasing power, especially among home-buyers from the US, Europe, Hong Kong and Singapore, had already dropped 20-50 per cent. Nevertheless the grounds of this study are questionable since Colliers is not really involved with the Phuket market.
3. A "P/E" (price/earning ratio) deeemed too high: a low rental yield due to high purchase price.
4. High maintenance cost.
   Generaly, maintenance fees in gated communities in Phuket are around 50  ฿ per m². owners who pay over $500 fees every month are not unusual.
5. The fall in row material cost, and consequently the fall of construction costs, will lead to a decreasing of price of new properties and therefore will lead the whole market down.
6. An anarchic development that takes no care of the environment.
    
2. Positive arguments
   1. Even if the political crisis is far from over, troubles have apparently calmed down. It is noticeable that there is in Thailand a feeling of safety that does not exist anymore in Europe.
   2. Yes, Thailand is hit hard by the economic crisis, but its impact on the local real estate market, especially in Phuket, is different than in the rest of the world.
      First, there was not here really any "sub-prime" effect, since the banks were previously not or rarely granting loans.
      When a market flourishes, a certain part of speculation is unavoidable.
      Nevertheless, what I have observed here since 2004, as a real estate broker and as a property developer is not a pack of investments funds looking for the best return and building up a bubble, but rather individuals who were buying a property for their own use, i.e. holiday or retirement. Since the main goal was not to make money on a short term, and since these pruchases were paid up cash, finally few property owners really need to sell there property at this point.
   3. The P/E is indeed high, in particular for properties located near the West Coast beaches and oriented toward the seasonal market. However, it is still possible to find properties with a decent rental yield for properties oriented toward the resident market -instead of the seasonal market- and bought at a reasonable price.
   4. The deflationist argument will stand only over a very short period of time, since we are talking about limited (non-renewable) ressources: steel, copper, cement, without talking about oil -which multiplifies cost rise with transportation cost- all these commodities are "exhaustible". Besides, since we are on an island that is even smaller than Singapore (respectively 543 m² and 693 m²), the price  of land for development is likely to remain high. Moreover, many projects have been canceled or suspended, which reduces steeply the offer.
   5. At last, there is what I would call the "non-quantifiable".
      Here are a few shots of the islands of Phang Nga Bay. It's an hour drive away from Phuket and it's wonderful.It's an essential factor; people come to Phuket for i's quality of life.
       

    Before concluding, I would like to highlight that the Phuket real estate market is, by essence, slow. We are evolving into an 'international" market, which means that, once the property is put for sale, that it is advertised on an international medium, we still need to wait for the prospective buyer to organize a trip to Phuket (i.e. that he/she makes some free time, books a plane ticket etc...) in order to visit it.  This lengthens the time during which the property stays on the market. When it is counted in days in Singapore, in Phuket, a property is rarely sold in less than 6 months.

Therefore, when I speak about short term, I look at the high season 2009-2010 or even 2010-2011. 

At a national level, analysts working for big real estate companies such as Supalai, Land and Houses or  Asian Property Development forecast less transactions for 2009, even thought the value of properties should decrease by 5 to 10% due to construction cost fall and despite the fiscal incitation created recently by the gouvernment.

This analysis cannot be applied directly onto the Phuket market, because of its specificity. 
On one hand, fiscal incitations (tax allowances on sales would raise from  ฿ 100,000 to 200,000) will have a an impact only on sales inferior to THB 3 million (about $80,000), and Phuket market is rather high end.
On the other hand,  it is rahter a second home market than a main home market: the buyers' concerna are different.

Nevertheless, I also think that few transactions will occur during the next 12 to 18 months.

Afterwards, it will depend on 2 parameters, i.e. the international economic situation and the local political situation, but I would rather be inclined to think that the market will consolidate and even start raising again.

Oodles of room at Phuket inns

Bangkok Post Jan 1, 2009

The number of new hotel rooms in Phuket will increase by 38 per cent this year notwithstanding the current domestic political situation and the international financial downturn.

Popular tourist destination Phuket could well suffer from an oversupply of hotel rooms in 2009.

In addition, 30 new hotels on the island are at various stages of development with over 4,918 rooms becoming available within the next three years, according to market research carried out by C9 Hotelworks, a hospitality consulting firm.

It found that there are nearly 40,000 rooms on offer in Phuket at the moment, ranging from guest houses to branded hotels. Approximately 10,000 of these are in international hotels.

There will be a 50 per cent increase in the number of international-standard units there, with 47 per cent of that figure being upscale and luxury hotels, 41 per cent midscale, nine per cent budget/economy and three per cent extended stay (villas/condominiums), according Bill Barnett, managing director of C9 Hotelworks.

2009 is set to see the largest surge in supply with 1,850 new rooms scheduled to open, he noted.

"Branding of hotels is also on the rise with 27 of the 30 hotels operated by international, regional and domestic chains. Thailand-based brands such as Anantara and Centara are growing at a rapid pace and regional chains such as Langham are now expanding into the country," he said.

The firm's market research also revealed that two locations, the east coast of Phuket and Phang Nga Bay, are set to define a whole new era in the luxury-property sector.