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Thai property funds may appeal to investors wishing to beat inflation, as their returns averaged 8.6 per cent over the past 12 months, the highest rate in Asia, experts said yesterday.

The average inflation forecast for this year is about 8 per cent.

Already 20 property funds have been listed since they were approved as an investment vehicle five years ago and 21 are heading for a public offering.

SCB Asset Management will launch two property funds this year, while Kasikorn Asset Management will debut one next month.

The spread between the dividend yield of property funds and the interest rate of Thai government bonds was as much as 3 percentage points, said Yupharet Likitsansuk, vice president for research at SCB Securities Co Ltd.

Currently the return on a government bond maturing in 10 years was 5.55 per cent, he said.

Four out of the existing 20 property funds can generate dividend yields above the average rate, he said.

The Samui Airport Property Fund (SPF), which invested in Samui Airport, returned 10.9 per cent in dividends.

The Future Park Property Fund and CPN Retail Growth Property Fund, which invested in retail property assets, gave 9.8 per cent and 8.9 per cent, while Q House Property Fund (QHPF), which owns office buildings, provided 9.5 per cent in dividends, he said.

While property funds are a good option for investors, their weak point is a lack of liquidity.

Adisorn Sermchaiwong, executive vice president of Siam Commercial Bank, said that if investors need to cash in their property funds now, they might have to sell at a price lower than the funds' NAVs.

That makes this kind of investment suitable for those who are comfortable with long-term

holdings and satisfied with a re-gular stream of dividends from rental income, instead of capital gains.

Yupharet said the total value of the 20 trading property funds is about Bt53 billion. With 21 funds going through the process for a public offering and the existing funds planning to expand in size, the total value of Thailand's property funds will rise to above Bt100 billion, he said.

"SCB will launch two property funds which will invest in a distribution centre and a hotel. Besides we will expand the QHPF. Right now the price of QHPF [stock] is about Bt8, which is over a 20-per-cent discount from the NAV, which is Bt10.60," he said.

What the investor should consider in a property fund was whether it offered a high dividend, how liquid it was and how good was the quality of its real estate assets.

Aliwassa Pathnadabutr, managing director of CB Richard Ellis, said office rents in Thailand were presently about Bt800 per square metre, which was very cheap compared to other countries in Asia such as: Singapore at Bt4,000, Japan at Bt6,000 and China over Bt1,000, while the demand for office rentals was about to reach supply.

"About the investment in the distribution centre, the return will be more secure because of the long-term lease, but if the businesses using the warehouse get into trouble, the property fund will also suffer," she said.

Tawit Thanachanan, first senior vice president of Kasikorn-

bank, said that next month a property fund would be offered as a new investment product for customers.