Bangkok's property market: shift happens

Jan. 12, 2011 - PRLog -- At the end of last year, The Economist published an article "Now hope is on the move", saying that in a recent poll "some 87% of Chinese, 50% of Brazilians and 45% of Indians think their country is going in the right direction, whereas 31% of Britons, 30% of Americans and 26% of the French do. Companies, meanwhile, are investing in 'emerging markets' and sidelining the developed world. 'Go east, young man' looks set to become the rallying cry of the 21st century."

It was suggested by CBRE that faster resurgence than in 1997 crisis is expected this year because of "rapid global action and good local financial health" and predicted back then that "Thailand's property market is expected to recover" in 2011".

According to Aliwassa Pathnadabutr, managing director of CB Richard Ellis (Thailand): "We believe that this recovery cycle will be faster than that after the 1997 financial crisis because global leaders such as the US, the UK, Europe, Japan and China have launched measures to solve the problem. Meanwhile, Thailand's property developers and finance firms are healthier, financially, than they were in 1997."

There are always some that advocate the resurgence of the property market this year but caution needs to be added into the mix: the global property bust that led the world into recession did start to lift in 2010, with property prices up in Britain and stabilised in America. By late 2010 output and employment was up in most "mature" economies but Europe has been humbled by its sovereign-debt crisis, which is undermining the euro.

So we can't be altogether sanguine about the recovery in property markets this year as some might have us believe. One of the major problems facing Bangkok is the continuing political uncertainty and the oversupply of rentable space relative to demand.

Surprisingly, though, Thailand Property Market concludes that Thailand's economic fundamentals are strong as the country "continues to be an attractive place to do business" with the baht and the stock market at an all-time high.

Jones Lang LaSalle concludes in its report that this year is expected to see a much greater divergence in real estate activity and performance: global direct commercial real estate investment volumes rising by 25-35% on 2010 levels; Asia Pacific will lead the upswing in leasing markets, ahead of Europe and North America; prime property will continue to outperform secondary; and that the domestic corporate sector will come to the fore in Asia Pacific, particularly in India and China.

They also predict that "robust competition for trophy assets in the world's high order business hubs will continue to push up capital values, with London, Paris and Moscow offices expected to achieve double-digit prime capital appreciation in 2011", while in the major Asia Pacific cities, "prices may be forced up beyond usual risk return capitalisation rates, particularly when compared to levels that can be achieved in more mature markets such as London."

Looking at the year ahead, we feel that in attractive investment opportunities to take advantage of selective value-add and opportunistic strategies there is every reason for optimism in US real estate markets for 2011 in spite of the fact that quantitative easing and pressure on expanding government budget deficits.

This couldl see the economic growth trajectory and outlook to be one of maintaining parity with caution and opportunity. It is also likely that Thailand will continue moving forward with the 'emerging markets' of China and India likely to expand. This could lead to their investing in attractive markets such as Thailand.

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