Despite the current political turmoil, the demand for prime land in Bangkok's central business district for investment remains robust, according to CBRE.
The real-estate services firm does not expect the political problems to have an adverse impact on CBD prices because there is a limited supply of freehold prime land in central Bangkok.
There are few willing sellers and most is held by cash-rich owners who inherited their family land. Landholding expenses are very low as most land was not acquired through debt financing. There is virtually no landholding tax and no inheritance tax. This means most 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 condo developers have been able to outbid other types of property developers because of the high margins and quick project turnover.
Historically, land investment in Bangkok’s CBD has provided one of the highest investment returns, with about 15-per-cent year-on-year increases over recent years. 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.
Kulwadee Sawangsri, head of investment and land services at CBRE Thailand, said the price for a prime site on Sukhumvit Road had increased by about 480 per cent since 2002 to Bt1.5 million per square wah (Bt375,000 per square metre), the highest percentage increase of all of Bangkok’s prime areas. This is followed by the Silom/Sathorn area, with an increase of about 400 per cent to Bt1.4 million per square wah, and the Ploenchit/Lumpini area at about 320 per cent to Bt1.5 million per square wah.
There have been significant land-price increases in some suburban areas where construction of new mass-transit lines has triggered an increase in demand for condominium sites in areas such as Rathanathibet along the Purple Line route. Rathanathibet prices have increased by 30-50 per cent per year since the start of construction on the transit route. CBRE expects that expansion of the mass-transit system will have similar effects on land prices in other suburban areas.
CBRE believes that the centre of Bangkok will continue to be the most sought-after location for the best-quality offices, hotels, shopping centres and residences. This means there will be continued demand in the future for the limited number of prime development sites in the CBD.
“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,” Kulwadee said.