Signs of a measure of calm returned to global stock markets on Friday, ending a tumultuous week.  Asian stocks extended their region-wide rebound Friday, with Hong Kong shares leading the way with a 6.73 per cent jump, ending one of the most volatile weeks in the market’s history.

In Bangkok, the SET index surged 32.32 points up 4.3 per cent, marking the Bangkok bourse’s first substantial rebound since the US announced interest rates cuts to stimulate its economy. Japan‘s Nikkei index soared more than 4 per cent, and the Topix 4.7 per cent. India‘s Sensex and Nifty indices both added on more than 6 per cent.  Stocks on the Singapore Exchange climbed 3.59 per cent. Stocks in Taiwan, rose nearly 3 per cent, fueled by a rally of technology shares and gains on Wall Street for two consecutive days. Philippine share prices rose 2.85 per cent, and Australian stocks charged ahead 5 per cent. What do you think?  Bear market or correction? 

Nuntawun Polkuamdee of The Bangkok Post reports The Stock Exchange of Thailand ended its final day of trade for 2007 at 858.1 points, with Thai stocks posting a 26.22% gain for 2007. 

The smaller Market for Alternative Investment posted even stronger gains, rising 40.81% over the year to close at 272.37 points.

Foreign investors were net buyers of 55 billion baht worth of securities in 2007 and accounted for one-third of daily turnover. Local institutional investors, net buyers of 2.16 billion baht worth of stocks, accounted for 14.5% of daily turnover, while retail investors represented 52.5% of total trade.

The chairman of the Association of Securities Companies, Kampanart Lohacharoenvanich, said 2008 should be even more volatile for the Thai market, given risk factors such as US sub-prime mortgage crisis, high global oil prices and the US presidential elections, while local concerns include uncertainties about the new government and its policies, and tougher market regulation under the recently amended SEC Act.

Choppy times ahead.

http://www.bangkokpost.com/291207_Business/29Dec2007_biz23.php

The People Power Party (Thaksin’s allies) won 233 of the 480 seats in parliament, just short of the number needed to govern alone.  The Democratic Party, which came in second with 165 seats, has refused to join a PPP-led government. 

The remaining seats were split between five smaller parties.

The Thai Stock Exchange did not react significantly – although the SET was up around 1% at close on 27 December – not exactly a ringing endorsement.

An article in Hua Hin Today reveals a report by The Real Estate Information Center of Government Housing Bank confirming the property slowdown given the nationwide land & real estate fee payments decreased by both value and number for the first half of 2007 across all regions.  Meanwhile, an interview with the Deputy General of the Fiscal Policy Office, points to an increase in property fees in the third quarter, together with other indicators suggesting recovery is on its way.

Mr. Samma Kitasin, The Real estate Information Center director, reported that the nationwide land & real estate fee was paid 418,323 times in the first half of year 2007, decreasing 4% compared to the same period in the year 2006 (437,417 times). 2007′s payment totaled some 5,087 MB, a decrease of 6% compared to the 5,415 MB fee at the same period in 2006.

Land and real estate purchasing peaked in 2005: in that year the fee was paid 907,428 times, totaling 11,759 MB.

Bangkok and its surroundings were down 7% and central and northeastern regions were down 5%. Somewhat surprisingly the southern regions increased by 6%. Surat Thani Province had the highest increase at 50% in the first half of 2007, due primarily to the real estate development on the Island of Kho Samui.

Wichit Chaitron for The Nation however, reports that the economy has begun to show signs of recovery as the private investment and consumption start to pick up in the third quarter of this year. In an interview with Pannee Sathavarodom, Fiscal Policy Office’s Director General, he reported that the tax collected from property transactions expanded by 5.2 per cent in the third quarter after the negative growth in the past four quarters. The trend shows that the investment is set to expand to next year.

Other indicators cited by the Fiscal Policy Office’s Director General, for the economic recovery include:

• the rise of value added tax collection in the third quarter by 3.1 per cent year-on-year. VAT collection rose by 0.7 per cent in the second quarter compared to the same period last year

• the sale of cars and commercial vehicles rose year-on-year, following negative growth since the fourth quarter of last year
• Private investment increased in the third quarter of 2007 as imports of capital goods expanded by 4.9 per cent year-on-year, compared to the second quarter when the private investment rose by 3.9 per cent in terms of value. Prior to that private investment had dropped year-on-year.

The Director General concluded that the economic recovery process had already started in the city but the recovery process has yet to reach ‘up-country’.

At Thai Property News, there is no doubt in our minds that the property sector is softening: there are now examples of discounts being publicly offered by developers, and yet, there are equally bullish signs from others.  The property developer Petchboonma Co is examining developing more condominiums in the Sathon area after a successful launch on Ratchadaphisek Road resulted in 80% sales in the first two months, says marketing director Pattira Chaiyapatranun.  Likewise, the hotel operator Veranda Resort and Spa is expanding to the north of Thailand with an investment of 450 million baht to develop new resort and residential properties in Chiang Mai next year. The new resort, built at a cost of 350 million baht and located on a 30-rai hillside in Hang Dong district, has 69 rooms and two restaurants.

However, all this hangs in the balance and we must wait until the results of the election in December to  get a real steer on the way the property market in Thailand will go.  But if the indicators are right, and given the weakened Baht, now might be the time to push for some bargains in the Thai property market.

With the sudden weakening of the Baht last week, Anoma Srisukkasem of The Nation reported the central bank’s warning of currency volatility from risk aversion would continue if the sub-prime mortgage fiasco in the United States went unresolved.

The Bank of Thailand admitted it had intervened in the currency market late last week, warning importers not to bet that the Baht would simply continue to appreciate.

The Baht reversed from the appreciating trend of the previous few days to depreciate, opening at 33.99 to the US dollar, 0.21-per-cent weaker than the day before. The sudden weakening was caused by foreign investors shifting their money out of Asia, worried that Citigroup would be downgraded after the impact of sub-prime.

A wave of risk aversion – a phenomenon in which foreign investors draw their money out of emerging markets for fear of holding high-risk assets – could arise anytime, particularly after such an announcement by Citigroup. 

So….if you have got used to thinking of the Baht moving in a one-way direction, you may be disappointed – or again, pleasantly surprised – depending on your own position.  The Baht broke the critical level of 34 to the greenback on Wednesday and Thursday, due to a surplus in the current account and capital inflows.  

Good news if you’re looking to buy property in Thailand.  The combination of softening property prices and the weakening Baht and all this ahead of the election could mean the time is right.

Head of fixed income at Aberdeen Asset Management, says the volatility in the global financial markets caused by the US crisis has subsided. The markets have slowly recovered after the US Federal Reserve cut the policy rate by half a point last month. Positive quarterly earnings reports from major US banks and brokerages also boosted sentiment.

Emerging market economies will continue to grow at an attractive pace. In particular, China and India have started boosting other emerging economies around the globe.

“The Thai stock market is still considered very cheap when compared to those of neighbouring countries.”  “Investors can continue to collect quality yet underpriced stocks.”

The upcoming election will lead to more spending by both consumers and investors.  The prediction is for the SET index, currently at 852 points, to hit 900 by the end of this year and reach 1,000 next year.

According to Nasu Chunsom, the head of equities at Ayudhya Fund Management, investors should stick to the banking, energy, contractors and retail sectors.

Interestingly in Nasu’s view, “The sectors that should be avoided are export-oriented businesses and condominiums as the baht is still considered strong and the condo market is now oversupplied.”

Over the short term, however, volatility looks likely to persist as investors remain cautious and focused on a return to political normalcy, as well as the policies of the new government.  The King’s recent health scare will likely fuel that volatility.  Corporations continue to generate large amounts of cash with healthy balance sheets. With low debt levels and low capital expenditure, dividend payouts are highly attractive.

On a relative basis, the Thai stock market is trading at a 15-20% discount to regional peers, while dividends rank among the highest in the region.

So…a cautiously optimistic outlook on the Thai economy. 

And at a 15 times price-to-earnings ratio with an attractive dividend yield of 4-5%, Thai portfolios are trading at a discount to the Asia Pacific region. 

Good reason to overweight investment in Thailand and maintain a positive longer-term outlook…?

Since the Economic Crisis in the late 90′s, investors have realized the importance of quantitative research of the real estate market.  We think  Raimon Land’s,  “Condominium Focus”, published semi- annually is an invaluable tool to help you monitor the Condominium sector in Central Bangkok and Key Resort Areas of Thailand.

“The findings of the latest edition of Condominium Focus show that interest in condominiums in Thailand remains high and that premium developments are still in very high demand from both local and international buyers and investors.” Raimon Land CEO Mr. Nigel Cornick

Outlook

• Condominiums now the most favored type of property amongst local and international home buyers in Thailand.  Raimon Land foresee a bright outlook in this sector of the industry.
• The luxury segment definitely a niche market but still with few developers and very limited supply. Balance of Supply/Demand is healthy, with an active resale market for newly completed developments.
• Property values in Thailand still very attractive and prices will jump significantly once uncertainties over an elected government and changing policies diminishes.
• Developers of residential real estate have just started to tap into the lucrative tourism market available in Thailand. This now represents 30% of the luxury condominium industry but that figure is destined to grow significantly.

Inner-city Bangkok showed steady growth at the top-end of the market, with only a few developments offered in that segment, and selling fast with new price records for quality developments located on Sathorn and Sukhumvit roads.  Meanwhile, strong tourism figures support the expansion of Thailand resort properties. 30% of the total luxury condominium industry is now located in resort areas with solid interest in resort areas close to Bangkok, including Hua Hin and Pattaya locations. Demand in Phuket and Samui is more exposed to international concerns over local currency and policy issues on foreign investment.

And if you look more widely in the region, the stock markets have been riding high and investors, particularly from mainland China are banking their profits in the asian property markets to secure their gains. 

Clayton points to pre-sale figures achieved in recent projects launched by listed developers such as Supalai, Plus Property (a subsidiary of Sansiri), Noble and Raimon Land, demonstrate, in fact, the property market in Thailand is doing just fine.

Supalai launched its new riverside project, Supalai River Place, in June. The day after its launch, 85% of its 800 units were sold out, with prices in the one- to five-million-baht range.
Condo One launched a series of eight projects in various locations of the inner city. Most of those were sold out a few days after launch, and prices in the few units that remain available have continued to escalate.
Noble successfully sold 500 units at Noble Remix on Sukhumvit 36 within a few weeks, with prices in the three- to five-million-baht range. Noble is confident that successful investors in their Remix project will repeat their experience with the upcoming Noble Solo on Thong Lo.
And there’s more.

TCC CapitaLand, a joint venture between CapitaLand of Singapore and the TCC Land group of Thailand, recently introduced two new high-end projects: Emporio on Sukhumvit 24 and Empire Place in Sathorn.

CDL, after the takeover of the Pornpat Tower (later renamed Exchange Square), and the Millennium Hilton on the riverside (both vacant buildings), has announced a five-billion-baht condominium development on Sukhumvit 18-20, comprising four high-rise towers with a total of 600 units.

CentrePoint successfully launched The Pano on Rama III, in a joint venture with Krungthep Land last December. Most of the units with river views have been sold. Prices have already reached 100,000 baht per square metre for the best units.

HKR, the owner of Sukhothai Residences, also plans to inject several billion baht to develop a 46-storey condominium building at the back of the Sukhothai Hotel. 

SET-listed Raimon Land has successfully completed its Northshore project in Pattaya. The company has almost sold the entire project and more than 20% of the units have already changed hands prior to transfer, with capital appreciation of 20-50%. Northshore units are now reselling at 100,000 to 120,000 baht per sq m, equivalent to the high-end market in Bangkok.

The upcoming launch of Raimon Land’s 3.5-billion-baht Northpoint project in Pattaya has already generated interest from more than 1,200 pre-registered buyers. Most of the demand is from Bangkok residents, both Thai and foreign, and demonstrates the confidence that private individuals and investors have in well located properties in Thailand’s premium areas.

The recent completions and brisk sales of well-located developments in Bangkok and Pattaya is clear evidence that real estate is increasingly seen as a new alternative for local investors seeking an affordable, secure and attractive return on assets.

Whether it is in the mid-range market, with companies such as Supalai, or at the high end, with developers such as Raimon Land, the Thai real estate market steadily outperforms other types of investments.
For more information on Asian property investment, read the full report at : http://www.bangkokpost.com/

Consider this: the price of Somkid Gardens, which during the 1997 financial shake-up was around 100,000 baht a square metre, would, if there is a unit for sale today, be at least 140,000 to 170,000 baht a square metre.  ‘Only’ around a 40- 70% uplift. 

Most people would probably expect the price of their property to double over a decade – in markets such as the UK, historically, it may even have quadrupled!  But those balmy days in the UK, may be at an end. 

In a recent interview with The Bangkok Post, however, Nigel Cornick, CEO Raimon Land, expects the prices of luxury condominiums in Bangkok to double if not quadruple over the next five to 10 years.

”[Doubling]…would be most people’s expectation in a normal market, but in this market the prices currently being achieved are not high, historically or regionally, and they can only go up.”

Of course, he would say that. The official launch of his high-end River project is expected soon, following the run-away success of the recent soft-launch – aided by local, as well as foreign, investors.  And 185 Ratchadamri will follow soon.  But he has a point…

There are discounts to be had, and the Asian stock markets are booming….but there are sub-prime worries…and Thai elections due – a heady mix.  Fortune favours the brave they say. 

Is this the ‘right time’?

What’s your forecast for the Thai property market post Election?