Monthly Archives:' December 2015

Thailand leads hotel residence boom in SEA

According to new research by C9 Hotelworks, the Thai based consulting group. There are currently over 28,000 hotel-branded residential units for sale across the region representing 120 projects.

This led to Thailand becoming Southeast Asia’s number one in the field and exemplified the close association between global hospitality brands and property developers in Thailand. There is an estimated US $ 3.5 billion inventory for sale.

The rapid growth of traditional resort hotels cashing in on the real estate market has driven mass investment. The large hotel chains are using their weighty brand names to associate quality and service that is synonymous with their luxury chains. This in turn gives reassurance and an expectation of quality to the potential buyers.

 

Global Financial Crisis

During the global financial crisis, Asia like many other regions fell back to their core domestic market in terms of real estate. But more recently the progression has attracted an increasingly high volume of top tier developers with massive, large scale projects.

The differential between the average price of traditional urban Thai properties and resort destinations is significant. While urban prices of around US$ 7 sqm are still rising sharply the resort destinations are far lower at US$ 4sqm. Plus the latter offer a plethora of services and extras that are associated with a luxury brand.

Thailand leads the race at 37% with Indonesia 22% and Vietnam 18% also having considerable numbers. Malaysia and the Philippines 9% are also slowly growing with the same economic philosophy.

One key factor driving urban projects is the price of land. The projection forecasts calls for an increasing number of developers seeking associations and affiliations with major hotel group brands. This affiliation can offer between 20% / 30% premium in prices with the associated hospitality assets.

 

Phuket, Bangkok & Pattaya

The three top places in Thailand for such affiliated joint developments are Phuket, Bangkok and Pattaya. Together there are 44 developments with 5,000 units available for sale.

Another catalyst for the rising tide is the increasing demand by potential buyers for mix-use projects that contain hotel and real estate components. Large hotel brands can offer the facilities and luxury design, service that is almost becoming the norm for the buying market.

Traditional buyers are now being overshadowed by end users and in SEA, Asians are representing the largest buying segment showing a change in lifestyle living. Bangkok’s massive success story at the St Regis Residences demonstrated this, while a more recent Four Season’s development was also extremely popular.

Big Thai hotel and hospitality groups such as Minor, Onyx and Dusit are at the front end of this new economic push and are tapping into the movement both in Thailand and overseas. What is clear in looking at the landscape is that rapidly escalating land prices are driving developers to embrace mixed-use projects in increasing numbers, and often add in commercial, sporting and tourism attractions as part of broader lifestyle offerings.

 

Cost of Land

The facts and figures bear testament that the property market has a definitely changing face in Thailand and the SEA community as a whole.

Costs of land is partly driving this but it is much much more detailed than simply cost. The ability of global hotel chains with years of history and reputation have large input in the new new growing market. Their brands are associated with luxury, service and extremely high standards.

Together with their huge marketing awareness and past success they are the perfect partners for developers to associate with and to provide the perfect dwelling solution.

It is the face of property development for the future in Thailand and throughout the whole region. Buyers are becoming more demanding and wish for more associated services alongside their actual living unit.    

 

Loan Assistance for Home Buyers in Thailand

Buying homes in Thailand has complications just like any other country in the world. Finding initial deposits and fulfilling the necessary legal and payment requirements is just as much a pain in Thailand as anywhere else, especially with the current world economic climate.

In October 2015 short-term intermediate measures were announced by Finance Minister Apisak Tantivorawong to help house buyers secure the all important and difficult loans. Hopefully this in turn will stimulate the real estate market which will drive further construction. Mr Tantivorawong declined to comment on the implementation of the land and buildings tax and when it might come into effect.

 

VAT Proposals

There is a proposal to increase VAT from seven to ten percent but it might be offset by the nationwide e-payment initiative being fully implemented. Added to this is the introduction to encourage businesses to have only one financial account.

The Minister also added that the real problem to people securing house loans at present was that the banks were reluctant to give out money during the current economic climate.

 

Press Rejection

Mr Tantivorawong went on to further say that this was not a matter that should have been brought to public attention by the press as nothing had been finalised and currently nothing has changed.

This confusion could prove to panic people and force delays in house buying while people hesitate for legislation. His concern was any uncertainty over the confusion and mix messages abounding.

Apisak reiterated that the draft of the Land and Construction tax is still very much under review by the ministry as the new Council of Economic Ministers had assigned more work and understanding to take place to enable fairness to all parties.

 

Land And Construction Tax

The former finance minister and the former deputy prime minister signed off on the bill before their replacements took office, but the new Council of Economic Ministers have decided to revise the bill before it goes in front of the new Cabinet. The Minister quoted that he hoped the revision would be completed by the end of 2015.

 

Loan Assistance

Due to all these delays and the uncertainty facing the ratification of the bill and the possible hike in VAT, Mr Tantivorawong said e-payments and the single account measures should be able to compensate for the income gained from the VAT increase.

He personally believes that the measures could compensate the missing revenue and there would be no need to increase VAT.

Due to the delay then short term loan assistance would be implemented to help people in the interim to aid their purchasing of homes.

The president of the Thai Condominium Association, Mr Prasert Taedullayasatit was quoted as saying that it would be better if low income buyers had financial assistance to help and make it easier to get mortgages. He highlighted that the low income market was only responsible for 10% of the overall Thai property market last year.

 

The Five Stimuli Package

Whilst the housing market faced all this confusion the government implemented five key strategies to bring stimulus to the economy.

  • Corporate income tax would be reduced from 23% to 20%
  • Corporate income tax and dividend tax exemptions will be provided for government venture capital funds for a period of ten years.
  • Real estate transfer fees will be reduced from 2% to 0.01% for six months and mortgage fees will be reduced to 1% for the same period.
  • The Government Housing Bank will receive 10 billion baht to provide assistance to low income earners.
  • First home buyers can deduct taxable income with 20% of home value for a period of five years.

This stimuli is an attempt to provide financial help in this difficult period of uncertainty in the home buying market and whilst the economic slowdown is currently in effect.

The confusion of possible legislation concerning the rise in VAT has compounded the situation and the government is at pains to convince the market that this is only a suggestion and is not ratified.

ASEAN Loan Wars

ASEAN was established in 1967 in Bangkok and is the Association of Southeast Asian Nations. Member countries include Indonesia, Malaysia, Philippines, Singapore and Thailand, Brunei, Cambodia, Laos and Vietnam. Its aims include accelerating economic growth, social progress and the development of its members to bring regional stability and protection.  

Since the formation of ASEAN many external countries have been keen to grab the opportunity to take advantage of the association for their own political and commercial purposes and especially to cement their interests in the region. The main four countries vying for control are China, Japan, South Korea and the U.S.A.

It is obvious that China, Korea and Japan are keen to grow their involvement with countries on their borders and it has become recent American policy that their interest into Asia as a whole is accelerated. Recently two major events took place that amplified the economic interests of Japan and China within ASEAN.

 

BEJINGS LOAN AID PLEDGES TO ASEAN:

At the recent East Asia summit of November 2015 in Kuala Lumphur, China promised US$1O billion in loans to help infrastructure in Southeast Asia. This mammoth incentive was greeted with mixed reviews as some countries saw that it was a sweetener to deflect attention away from China’s controversial land reclamation program.

There was more money on the table as Vice Foreign Minister Liu Zhenmin pledged an extra US$560 million towards aid for underdeveloped and poorer ASEAN states. This was aimed towards the Philippines and Vietnam as the most tension over the China Sea disputes is with these two countries.

US President Barack Obama is also highly concerned with the slowly declining political situation over the South China sea land reclamations by China and extended an invitation to the 10 ASEAN leaders to visit the US in 2016.

 

JAPAN ANNOUNCES EASIER YEN LOANS TO ASEAN COUNTRIES:

At the same Asia Summit in Kuala Lumpur, Japan made a counter move to that of the Chinese loan pledge. Prime Minister Shinzo Abe announced that Japan will relax its Yen loan scheme for ASEAN countries to boost their infrastructure.

Tokyo’s move is seen as a countermeasure to that of China which is seen to be monopolising the huge demand for infrastructure development in Asia. Japan felt undermined by China winning the lucrative Indonesian high-speed railway project earlier in 2015.

The counter move will make it easier for Japan to provide development funds to emerging countries by lessening the loan processing time. Abe also reiterated his investment initiative he announced in May to provide US$110 billion to promote quality infrastructure in the next five years. Also this announcement coincided with the news that Japan will extend Y17 billion in loans to Cambodia for road development from Phnon Penh and Thailand.

Japan also pledged assistance to train 40,000 people in Asia, including ASEAN and India over the next three years in tandem set up a fund known as Japan ASEAN Women Empowerment Fund to female entrepreneurship in Asia.

This counter move by Japan compounds the battle that wealthy Asian and Western countries intend to wage against each other for cementing their foothold and control with the ASEAN countries.

 

ASEAN ALLIANCE:

There has been much work within the ASEAN group of countries to enhance development and growth within the alliance. Many barriers and red tape have been destroyed to allow free trade and commerce to develop including visa restrictions, allowing fellow members to work in other countries provided it is in eight designated sectors (including medicine, engineering and tourism)

However, more work needs to be done to develop other areas especially those that are politically sensitive. Such areas are; auto production and agriculture.

One of the biggest hurdles for development between ASEAN countries is corruption. And there is a big gap between the richer ASEAN countries and the less developed members. Indonesia, Singapore, Malaysia, Thailand, Philippines and Brunei are far more wealthy than Vietnam, Cambodia, myanmar and Laos.

This friction between the two different groups is perceived to be purely on wealth and is sometimes misinterpreted as exploitation by the less wealthy countries. The battle to include ASEAN countries in economic policies of external nations will increase as more and more nations see the value and potential of the region.