AEC : Looking to the Future for Thailand’s Property Market
For the last 18 months, increasingly property investors are talking about the ASEAN Economic Community (AEC), and a lot of focus is in predicting what the impact of South East Asia’s “Euro-zone” free trade area will be for the real estate sector.
Comprising 5 main elements, AEC will introduce a single market and production base using:
-free flow of goods
-free flow of services
-free flow of investment
-free flow of capital
-free flow of skilled labour
We sat down with PACE Development’s Chief Executive Officer, Khun Sorapoj Techakraisri, to get his take on how Thailand stands to benefit from AEC 2015.
What will the impact of AEC be for the Thai property market? Positive or negative?
(laughing) I am not a fortune teller to be able to say with 100% certainty! However, I am picking mostly very positive.We can look at the impact of other free trade common markets. Once momentum picks up, the entire area often will end up developing very quickly, with companies and individuals suddenly blessed with a new ability to move from country to country.
In terms of inbound investment, there will be a lot of firms who may base or expand headquarters and/or production in Thailand, as cost of living in Thailand is not expensive, worker productivity is solid and the location has easy access to the rest of the world.The immediate impact will be increased demand for both factory and commercial space throughout the country.
In Bangkok, the Eastern Seaboard and surrounding holiday beach towns, we will likely see substantial increased demand for space to work and live. Retail in Bangkok is already world-class, with a number of new projects in the pipeline of varying types ranging from super luxury enclaves, through to large scale malls, over to new never-seen before concepts such as PACE is doing with MahaNakhon. For residential, I believe we will see a substantial long term increase in demand for high end and super luxury residential which matches the standards of senior management from multinationals used to that high level of quality in Singapore, Hong Kong and further abroad.
Do you see a difference in residential available now and residential specifically targeting the AEC foreign market?
Thailand has always had a substantial number of short stay visitors with hotels and serviced apartments doing a good job of looking after them, and we will see some new international brands coming into the market place over the next 3 years, such as W Hotel, Edition, Waldoff Astoria, and Park Hyatt. However, it is the long stay and housing markets where I think we will see the most change. The rental property market will see a major impact, as a larger number of expats begin renting in prestige properties. There are currently a very limited number in the Thai market place which meet international level standards.
So what should developers focus on?
A driving factor to appeal to the foreign market will be meeting their needs, key factors for this group include:
-Excellent location with direct access to BTS, MRT, BRT
-High standard property management
-International standard fit outs, design and facilities
-Favourable rental/owner occupier ratio
The new trend of hotel branded residences will provide a new appeal for international residents, because it truly combines the best of both worlds, as a home with the services of a hotel.
What is the ‘favourable rental/owner occupier ratio’?
With AEC, we will see an influx of very savvy new executives coming to Thailand, wanting to live in the most desirable properties and with income to pay for the highest quality. This means a property that is well maintained, properly serviced, has a sense of community in the building and is neither overflowing with too many people nor empty with units sitting vacant.
The only way to achieve this is to have a majority of owner occupiers. Owners are automatically the best placed to comment or ensure the building is run correctly as designed, as not only is it an investment for them, but it is also their home. For buildings like Ficus Lane and Saladaeng Residences where common areas were designed into the building and facilities and quality were high from the beginning, the end result is that owners live in their property, which in turn results in a well run building, and sense of community. And of course, a rental premium can be achieved in a building where the number of available units for rental is relatively few, as is the case in both of those properties.
So what will the impact be for Thai investors looking to buy abroad?
With AEC, we can expect to see investors and developers looking to expand their markets into other countries, for example, Myanmar has recently become more open, and so some investors are looking at the options there, both to buy finished homes, and for developers looking to create new properties. We are already seeing UK and foreign properties being purchased by Thai investors, often either hotel branded or super luxury level developments, peace of mind and assurance of quality are major decision factors when purchasing abroad. We expect to see a few larger Thai developers continuing to undertake more work abroad, as they have competitive advantages in terms of sourcing, construction and experience in a wide range of markets from low to high.
How is PACE preparing for AEC?
Starting since Ficus Lane, we always had the philosophy of creating design driven properties, to match the needs of discerning buyers, featuring best locations, world-class specifications and delivery as promised. As a result we have been able to appeal to both international and local buyers. The insights from our past projects mean that we are including ‘best practice’ in construction, specification, design and facilities for all our future developments, knowing that they need to continue to appeal to local and international buyers alike.
AEC has guided us in terms of site selection; whereas certain parts of Bangkok are distinctly “Thai” or “foreigner”, we are focused more on neighbourhoods that have universal appeal, since longterm this will benefit owners the most financially,with the broadest appeal for both investors and owner occupiers. We have also brought forward 2 new projects which will be detailed in the next issue of Momentum, targeting completion in time to benefit purchasers who can enjoy a great development as well as all the benefits that AEC will bring to property owners. Most importantly, we remain committed to delivering world-class developments.