Despite the current political turmoil in Thailand, CBRE said the demand for prime central business district (CBD) land in Bangkok for investment purposes remains robust, and it does not expect the political problems to impact land prices because of the limited supply of freehold opportunities.
The real estate agency said there are few willing sellers, and the majority of land is held by cash-rich owners, who inherited their family land. Land holding expenses are very low as most land was not acquired through debt financing. There is virtually no land holding tax and no inheritance tax, it said, and this means the majority of landowners have very little pressure to sell. Transactions normally occur when the potential vendors are sufficiently enticed with a record-breaking offer price.
Over recent years, land prices have been driven upwards by developers buying sites to build condominiums for sale. This is because condominium developers have been able to outbid other types of property developer due to the high condominium development margins and the quick project turnover.
Historically, land investment in Bangkok’s CBD has provided one of the highest investment returns with about 15 percent year-on-year increases over recent years, CBRE said. This has enticed wealthy families to buy land and construct income-producing developments, despite low initial income yields, because they are attracted by the capital gain driven by land values.
According to Kulwadee Sawangsri, Head of Investment and Land Services at CBRE Thailand, the price for a prime site on the main Sukhumvit road increased by approximately 480 percent since 2002, and now stands at THB 1.5 million per sq. wah. This is the highest percentage increase of all Bangkok’s prime areas. This is followed by the Silom/Sathorn area with an increase of approximately 400 percent to THB 1.4 million per sq. wah, and the Ploenchit/Lumpini area at approximately 320 percent to THB 1.5 million per sq. wah.
There have been significant land price increases in some suburban areas where construction progress of new mass transit lines has triggered an increase in demand for condominium development sites. One such area is Rathanathibet along the route of the Purple line. Land prices in this area have increased by between 30–50 percent per year since the start of construction on the Purple line mass transit system. CBRE said that expansion of the mass transit system will have similar effects on land prices in other suburban areas.
Kulwadee said: “Prime CBD sites in Bangkok remain in high demand. Currently, vendors are asking future prices for their land as there is no pressure to sell. I believe that the land market will remain active this year if vendors are willing to deal at the current market prices.”
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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