Phuket Property: Thai property investors facing AEC land ownership hurdles, local competition issues

PHUKET: Although the ASEAN Economic Community (AEC) will open up opportunities for Thai investors in other countries in the region, the investors will have to be concerned about barriers to entering the property sector in those nations, experts have said.

They voiced this view at a seminar titled “AEC: Pros and Cons for the Property Sector”, conducted by the Real Estate Information Centre.

Prasert Taedullayasatit, director and chief business officer of Pruksa Real Estate, who has experience with investing in Vietnam, said Thai developers would need to study local laws and find the best partners when expanding into ASEAN countries.

Each nation has its own set of barriers to foreign businesses entering the property sector, especially regarding land-ownership rights. These affect residential projects, office buildings, and the hospitality business, he said.

“It took three years after deciding in 2009 to invest in Vietnam, before launching our first project there worth 3.5 billion baht this year,” he said.

The main problems in Vietnam are a) rights to own land, and b) the economy, which faced high inflation in 2010, which had a negative impact on business expansion, Prasert said.

Colliers International Thailand Associate Director Tony Picon said Myanmar currently had one of the highest barriers to property developers, with the requirement that foreign investors operate only in a joint venture in which the local partner has at least a 51 per cent interest, which is also the case in Thailand.

However, he said the demand in the property sector would grow strongly in AEC countries, especially Myanmar, where the supply of office space, serviced apartments and hotels was not enough to serve the market. This has driven the rental price of office space in Yangon to US$150 (4,620 baht) per square meter per month, compared with US$30 for a grade A office in Bangkok.

James Pitchon, executive director of CB Richard Ellis Thailand Co, said all the countries in ASEAN had barriers to entering the property sector. However, some of them still needed investment in this sector, including Vietnam and Cambodia.

Like Myanmar, those two countries have an insufficient supply of residential, office, and hotel facilities to serve the demand that will see strong growth when the AEC becomes effective in 2015, bringing in new investment from multinational companies, he said.

Suphin Meechuchep, managing director of Jones Lang LaSalle (Thailand), said the supply of office space in Jakarta was only 4.3 million square meters, or just over half of Bangkok’s 8 million sqm. But Jakarta has an office vacancy rate of only 5 per cent, strongly indicating growing demand for office space.

In the Philippines, demand for residential projects is also growing strongly, especially for condominiums priced lower than 3 million baht. Most developers who invest in condos and open them to rental will see returns of 6 per cent per year, she said.

Malaysia and Singapore also have strong demand in the residential and hospitality sectors, and the governments of both countries encourage foreign investors to come in. This is in contrast to the more difficult situation in other AEC countries, said Poramet Chantanakomet, country head of DTZ (Thailand).

AEC to creat local competition
THE Asean Economic Community (AEC) will offer new expansion opportunities for Thai property developers, though they will also face tight competition from regional investors, property experts warned recently.

Chainid Ngowsirimanee, CEO of Property Perfect, said that once the AEC goes into effect in 2015, the residential market for local property firms would expand from 65 million people in Thailand to a regional market of 600 million. However, this will also open the local property market to foreigners.

He said local property firms that were strong enough could easily expand their presence regionally, depending on each country’s foreign-investment regulations, once the AEC goes into effect.

Several Thai property firms have already started expanding overseas. For instance, Pruksa Real Estate is now in Vietnam, India and the Maldives; Land & House has entered California; Sansiri is in London; and Central Pattana is investing in Italy and China.

Thamrong Panyasakul-wong, president of the Thai Condominium Association, said that though the AEC will offer wider opportunities to Thai property firms, they should also be prepared for tight competition from foreign investors, especially in the hospitality industry.

“The AEC can be both good and bad for Thai property developers, depending on the firms’ financial health,” he said.

— Somluck Srimalee