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Bangkok condo projects lure major offshore investments

February 23, 2019

PROPERTY firms from Japan, Singapore, Hong Kong and mainland China have expanded their investment in Thailand’s property market by focusing on condominium development projects located close to the mass transit system.

The investment is happening in parallel with government plans to develop infrastructure projects worth over Bt2.2 trillion this year and in the next five years.

“Thailand has a number of economic corridor projects and the country is considered the hub of the greater Mekong sub-region, while Bangkok has continued to attract people as the centre of the economy,” said Toshiyuki Hoshino, director, senior managing executive officer and executive general manager of International Business Headquarters of Tokyu Corp.

Those factors “bring about sustainable housing demand,” he said, “and as a result we have expand our investment in Thailand since the year 2014 and also decided to set a joint venture firm with Sansiri Plc to develop residential projects in Bangkok.”

Tokyu Corp is not the only Japanese firm to expand its investment in Thailand’s property market. Others have done the same since 2013, most of them expanding their business in the property market through partnering in joint ventures with Thai property developers.

Hiroki Mitsumata, president of the Bangkok office of the Japan External Trade Organisation, said recently that Japanese investors are interested in expanding their investment in Thailand, particularly in hospitality, property, medical, retail, digital content, and high tech sectors.

In fact, Thailand was Japan’s second-largest investment destination in Asean after Singapore as of the end of 2015, according to the Japanese Finance Ministry. Combined initial investment capital from Japan to Thailand was worth US$55 billion (Bt1.9 trillion).

The Board of Investment (BOI) has reported that Japan is Thailand’s leading foreign direct investor (FDI), accounting for 39 per cent of total FDI, followed by Singapore at 12 per cent, mainland China at 7 per cent, Hong Kong 6 per cent, Taiwan 5 per cent, and others 36 per cent.

Firms from others countries, including Hong Kong, Singapore and mainland China, have also expanded their investment in Thailand’s property market. Most focus on developing condominium projects located close to mass transit systems, where they see strong market demand.

Thai companies welcome the investment. “We joint venture with Chinese firm when we see the opportunity to promote our products to Chinese buyers who are interested in buying residential property in Thailand, because our partner will also support both our capital and marketing,” Pairoj Watanavarodom, managing director of WJSP Property Plc, said recently.

Local property firms have to change their approach to succeed in this new market with its higher costs and risks.

Prasert Taedullayasatis, president of the Thai Condominium Association and chief executive of Pruksa Real Estate Plc, said: “Thai property firms have to change their business strategy to joint venture with foreign firms, and also join together with Thai partners to develop their residential projects.”

They need bigger budgets to bring their projects to market, more capital and marketing collaboration to drive their business growth, he said. “Business risks have increased, including the recent bank restrictions on providing mortgage loans, and high competition in the marketplace,” said Prasert.

Research by international brokerage JLL found that Asian investors expanding their investment overseas account for five of the 10 biggest cross-border spenders. Inter-regional investment reached US$19.5 billion in the second quarter of this year, up 71 per cent from the same period last year.

In the Asia Pacific, total transaction volumes amounted to US$31 billion in the second quarter of this year, up 6 per cent from the first quarter. Investment volumes across the region were at US$61 billion in the first half.

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