Recent phenomenal growth in Pattaya's condo market
By Jon Fernquest |
Monday's business section of the Bangkok Post carried an article on the real estate boom that Pattaya has been experiencing for several years now.
Starting in 2004 activity in Pattaya's real estate sector started to pick up with the construction of high end condominiums:
The year 2004 signaled the rebirth of Pattaya's real estate sector. Prior to this, few high-quality apartments had been completed.Continued growth in new housing construction permits since 2004, which grew to the 3.9 million square metres approved in 2006, indicates a healthy property market. Of note is the percentage of permits issued for high-rise residential construction, which tripled from 7% in 2004 to 21% in 2006. A high-rise building is recognised as being more than eight stories high.
The successful launch of Raimon Land's Northshore project in 2004 triggered a wave of upmarket beachfront high-rise developments including La Royale (2005), Ocean Portofino (2005), The Sails (2006), Northpoint (2006) and The Spinnaker (2007). A total of 1,000 new high-end beachfront condominium units are expected to be completed over the next three years.
Premium grade A condominium projects have joined beachfront developments in popularity, bringing the number launched between 2004 and 2007 to 31 sites for a total of 5,177 units."
(See photo on right of The Sails condominium development)
Condo units entering the market each year are split evenly between Pattaya, Jomtien Beach, and outside areas such as Rayong and Sri Racha.
"The number of units launched per year has also climbed, with 2,268 new units announced in 2007. Pattaya itself received 33% of the newly launched units, with 11% and 22% in North and Central Pattaya respectively.The Jomtien area attracted 26% of the new launches, with 2% in Jomtien itself and 24% in Na Jomtien. Interestingly, 41% of new launches were located outside of the Pattaya and Jomtien areas, with growing interest for Si Racha and nearby Rayong."
Condos are attractive to foreign buyers as vacation and retirement homes for several reasons:
"Condominiums are popular among international investors as they are more affordable and the only type of property in Thailand that a foreigner can own 100% freehold. Security and maintenance issues are handled by common area management, adding to the confidence in a holiday home investment."
The composition of ownership has been changing in recent years:
"Most foreign property buyers are British, American, Australian and Swedish, a line up that has not changed in recent years and remains a strong base for alien ownership.Russia recently entered the top five buying nations to demonstrate the emergence of Eastern European investors. Increased interest from China and South Korea is due to the easing of restrictions on fund transfers.
The Germans, French and Scandinavians are also important buyers, and reflect the increasing trend for Europeans to purchase second homes outside traditional European resort destinations. Many have either relocated to Pattaya, spend the European winter there or live in regional business centres such as Singapore, Hong Kong and Shanghai."
Long-term investment potential is another factor that has driven the Pattaya real estate sector:
"Backed by a thriving economy and a populace brimming with retirees, tourists, expatriates and prosperous businessmen, Pattaya is fast turning the heads of savvy investors looking for handsome returns in a beach destination.Pattaya continues to attract astute property investors, who believe today's market conditions offer the opportunity to lock into excellent future returns, either from rental income or through capital growth."
Capital gains from appreciation in property values is one type of return on investment:
"Short-term investors have already cashed in by turning over luxury condominiums during the period of short supply. An example is the 187-unit Northshore, which launched in 2004 and sold out before opening in 2006. By 2005, resales were bringing in returns of more than 30% with rates jumping to 40-50% the following year.Appreciation has been strong. The price record of 119,718 baht per square metre in 2006 jumped 10.7% to 132,479 baht per square metre in 2007, and the sale generated a record-setting capital gain of 80%.
Most of the top 10 sales in 2006-07 generated capital gains of around 30-50%, with the latest resale occurring last month, achieving 180,000 baht per square metre."
Rental income or "rental yields" is another form of return on real estate investment:
"Though the returns may not be as spectacular, low-risk, long-term investments in high-end properties can be profitable. While it may be best to steer clear of developers guaranteeing annual gross rental yields of 10%, this level can certainly be achieved as also exhibited at Northshore, where 6-8% yields are already being realised and future capital gains are expected to be handsome.A typical rental contract is for 12 months and not by the day, with monthly rates between 500 and 650 baht per square metre. Two main markets feed the rental sector: Pattaya residents who are often North American retirees and foreign executives - mostly Japanese, South Korean and Malaysian - who work at industrial estates in the area."
The background of this article:
"This is the second in a series of three articles that draws on research by Raimon Land detailed in the upcoming publication, 'Why Invest ... Pattaya. To reserve a copy, contact Raimon Land Research e-mail: research@raimonland.com. The third article on March 3 will examine the booming Eastern Seaboard economy and its impact the Pattaya property market.Nigel Cornick is Chief Executive Officer of Raimon Land Public Co Ltd, Thailand's leading international property developer with projects in Bangkok, Phuket and Pattaya. For more information visit" [http://www.raimonland.com]
(Source: Bangkok Post, business section, Property Insights, Nigel Cornick, 18-02-08, temp-link)
Vocabulary:
phenomenal growth - unusually large growth
started to pick up - started to become more active and move more quickly
housing construction permits - official government document giving permission to build
recognised as Y - authorities or experts define it as Y
triggered - caused to happen
a wave of - a sudden increase in activity (like a wave of water at the beach)
upmarket - expensive and high quality
beachfront - built on the beach
premium - higher quality
grade A - a very high standard or ranking (AA or AAA would be even higher)
freehold - the dwelling is fully owned by the owner, not leased (foreigners cannot own land in Thailand, but they can own a condo or structures built on land)
common area management - when the residents of a condo each pay a yearly maintenance fee to have the common areas such as swimming pool, halls, lift, and parking lot managed and maintained
an alien - a person who is not a citizen of the country
easing of restrictions on fund transfers - the government made it easier for them to send money out of the country (this makes it easier for them to buy real estate in Thailand)
potential - the possibility or likelihood of success
a thriving economy - the economy is strong and healthy and people are doing well
populace - the people who live in a place
brimming with - full of
expatriates - foreigners living permanently outside of their country
turning the heads - impressive, people notice
savvy - have a good practical understanding of how something works
return on investment - profit from investment
handsome returns - making a very good return on an investment
astute - show a deep knowledge of situations and peoples' behaviour and are clever in using this knowledge
capital gains - money made from buying low and selling high
appreciation in property values - increase in the value of real estate
cashed in, liquidated - sell an asset for cash, turn ionto cash
turning over - selling
yields - the profit produced by an investment
spectacular - very impressive and dramatic
steer clear of - avoid
gross - the total amount (before any deductions)
X baht realised on sale - X baht was paid in the sale
industrial estates - specially equipped areas for factories
