Invest In Pattaya Blog

Real Estate Investment, Real Estate Investing

Real estate investment involves the commitment of funds to property with an aim to generate income through rental or lease and to achieve capital appreciation. Real estate refers to immovable property, such as land, and everything else that is permanently attached to it, such as buildings. When a person acquires real estate, s/he also acquires a set of rights, including possession, control and transfer rights.

Understanding real estate investment is crucial because it usually involves a substantial investment and a long-term one. Moreover , the real estate market can be unpredictable. This is particularly important when one goes beyond buying a home to actually ‘investing’ in real estate. There are a number of ways in which an investor can participate in the real estate market.
Real Estate Investment: Rental

One can opt for real estate investment with an aim to rent the property out to a tenant. The owner (landlord) earns a continuous stream of rent from the tenant, but is responsible for paying the mortgage, taxes and any costs associated with maintaining the property. The owner also benefits from capital appreciation (a rise in the value of the property over time). The landlord runs the risk of not finding a tenant and could suffer negative monthly cash flows, with mortgage payments and maintenance expenses still to be borne. As compared to owning stocks and bonds, rental real estate requires a significant amount time and effort to be devoted by the landlord.
Real Estate Investment Groups

Real estate investment groups are similar to small mutual funds. They are set up for rental properties. While an investor may own one or more units, a professionally managed company acquires, builds, maintains and lets out all the units on the properties in exchange for a percentage of the monthly rent.
www.condo-for-sale-in-pattaya.com

Foreign exchange and how it affects the Thai property market.

In resorts such as Pattaya, the foreign exchange rate is keenly watched by all. Not only does the level of the Baht dictate affordability of all services to overseas visitors but also, more crucially, it has a direct impact on the property market.

While a weak currency would appear to be the best scenario for the Thai property market, allowing foreigners to buy property cheap, it does not necessarily bode well from an investment perpective. In the first place, rental returns will be forthcoming in the local currancy and so the value of these returns will also be low in terms of the base currency used.

Furthermore a currency that is seen to be on a weakening trend can start to eat into potential property gains. Although property will become more and more enticing to overseas buyers, the fall in the value of the currency may be mean that gains are poor. Indeed if a trend is evident there is no incentive for buyers to rush in and buy if they can secure local funds at a cheaper exchange rate going forward.

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Thailand economy looks like recovering positive effect on property market

Thailand’s Central bank has revised its forecast on the economy from a 3 – 4.5% contraction this year, to a 2.5% to 3.5%, as the economy shows clear signs that it is emerging from recession.

Not least of those signs is a 60% surge in Thailand’s benchmark stock index since March, on the back of reduced interest rates and other efforts to stimulate the economy.

Similar effects are being revealed across Asia, because Asian economies — in the main — contracted mainly because of reduced external demand, and not the collapse of their financial system causing a restriction of internal liquidity and therefore consumption. This is unlike the UK, US et al which contracted firstly because of the latter, and then even further because of the former.

Thailand’s economy has obviously contracted, and quite severely as well, not least because of a massive drops in exports and international tourism. However, many Asian economies did not contract, not least India and China, so regional tourism; Thailand’s biggest market survived relatively unscathed, especially after interest rates across Asia.

Thailand’s own interest rate cuts then allowed Thai companies to cut prices and the survival rate was a lot higher than in the west.

As for the property market, developers quickly adapted to the loss of foreign buyers and began building affordable housing to target the growing domestic demand. This led to a recovery in their fortunes very quickly.

None the less there are thousands of luxury villas and apartments for sale in Thailand, and these will be glad that international demand for luxury property abroad is once again on the rise.

Source: http://www.property-abroad.com/

Thai property compared to other investment options

While rental yields may seem moderate in the current economic climate, continued low interest rates are likely to ensure market stability as property remains the favoured investment.

Interest rates play a complex role in the property market. On the one hand, they help set the price of property by dictating the affordability of mortgage repayments. On the other side of the interest rate spread, bank deposit rates are eyed with interest, since these are instrumental in driving yield based property investments.

Currently it is well known that deposited funds in a Thai savings account will provide virtually no return, and so property rental yields as low as three or four percent still look attractive.

Dexter Norville, director of property and asset management, Jones Lang LaSalle Management Research said, “Nobody can expect to command the rental yields that they may have enjoyed two or three years ago, as rents have moderated. However, one thing remains constant. A decent unit in a decent building will still be just that when the economy upturns.”

For the current buy-to-let market, affordability is the real starting point in the equation. Rents will ultimately move to a level representing the maximum that tenants are willing to pay. In a market where there is a lack of demand, further downward pressure on rental rates can be evident. Properties are then priced with this in mind, taking into account a yield factor that is attractive enough compared to bank deposit rates to cover risk and effort.

Whilst relatively few buyers in the market are cash buyers, the deposit interest rate argument is powerful nonetheless. When rates are close to zero, a scramble for property ownership is often seen.

“Looking at the market, interest rates haven’t varied much in the last 18 months. In this environment, people are more inclined to diversify their savings and investments. Property traditionally has a yield and so is attractive from that perspective.” Norville added.

In the central business districts of Bangkok, the economic downturn has lead to rental affordability showing itself. Whereas a Bt10m condominium in Sathorn Road would have comfortably provided a Bt50,000 per month rental return in previous years, some owners are experiencing periods of vacancy and are starting to reduce their rental expectations.

Norville said, “Some investors are being nimble in the current market, renting out units at a discount for a short term period so as to cover themselves in the event that rents start to rise soon thereafter. This enables them to secure tenants, whilst preserving a good bargaining position at the end of the term.”

Discounting of rents has not overly affected property prices, since even a four percent yield is attractive in today’s market. Property prices have held firm with the yield recalculated accordingly.

This is all well and good against a stable interest rate background, but if rates move sharply higher, the spectre of property price movements looms. Higher deposit rates will look attractive against these current low property rental yields, and if rents are unable to rise due to affordability, then property prices may need to move down to fill the void. It is a scenario undoubtedly being mulled over currently by potential buy-to-let investors.

Robert Krause, director, Professional Property Consultants Ltd., told Property Report Thailand, “Although some might take the view that interest rates may rise in the future providing savings rates higher than current rental yields, this is likely to be a very gradual process and is by no means guaranteed in any particular time frame. All the while, rental revenue could have been forthcoming from a property investment made at the current time.”

It is worth noting that interest rate rises are usually accompanied by a more buoyant economy, allowing rental rates and property prices to remain firm. The depth of the contraction does support the premise that rate rises will come at a time of recovery.

“Buyers looking to secure a property investment in the current market could well find that low yields today turn into higher yields tomorrow,” Norville added.

In Thailand, recovery will likely lead to an increase in expatriate workers from countries such as Japan, reversing any exodus just as quickly as it took place. Even just an outlook for steadily higher rental returns can be enough to support property prices, ahead of any actual recovery.

Krause added, “It must also be remembered that higher interest rates often accompany periods of inflation. These are periods when money loses its value and so a stance of property ownership is well supported.”

At the same time it is important not to overlook the primary market forces of supply and demand. Typically in low interest rate environments, credit is easy to come by and developers are in a good position to start new projects.

Currently though, the low interest rate environment has persisted alongside very tight credit conditions. Off-plan buyers are also more cautious about handing over deposits. As such, new development potential is being limited to the stronger cash rich developers, providing a higher level of quality stock to the market, but less overall supply. This is welcome news as over supply has traditionally been a strong contributing factor to softer prices in the Thai market.

“For a long term investment, it’s a great time to buy if you have the money available or can get the finance. It certainly is a buyers market as you can negotiate very well in the current environment,” Krause said.

Although there are a number of new residential projects due to be completed in the coming 12 months in central Bangkok, most of these commenced in the years before the economic crisis started.

“It is well known that there will be added supply to the Bangkok market in the short term. This could be a good opportunity as it will likely strengthen buyers’ positions, albeit temporarily,” said Krause.

Thereafter, the Thai property market may well escape a cycle of over-supply, further adding weight to the suggestion that the current market could indeed be a buyers’ paradise.

Source: http://www.property-report.com/

“Great potential” for Thailand property

Thailand offers “great potential” to overseas property buyers, one real estate expert has claimed.

Nick Marr, chief executive officer of Homesgofast.com, stated that the country has attracted the interest of developers, airlines and holidaymakers and that those looking to purchase homes abroad should also consider the location.

Noting that Thailand has not been immune from the global economic downturn, Mr Marr said that “the groundwork for recovery is being laid for a healthy property market”, stating that he expects the sector to recover during 2010.

“The property market in Bangkok has a large unsold inventory of condos that offer very low prices,” he explained, adding that demand for these properties is likely to increase when investors discover the selection of cheap investment opportunities that are available.

According to a recent study by CB Richard Ellis, demand for houses in Thailand’s capital, Bangkok, fell during the third quarter of 2008, with supply of apartments in the city totalling over 10,000 in December of last year.

Iguana Group – The Only AIPP Approved Property Developer in Thailand

AIPP – Not here to sell Property overseas. We’re here to make sure its sold properly”

Iguana Company Ltd., is the only real estate property developer in Thailand to be approved by the Association of International Property Professionals, the industry body for the international property market. A non-profit organisation, the AIPP has been set up for one reason only: to improve standards of professionalism in this market. In a largely unregulated market, AIPP Members voluntarily agree to follow a professional Code of Conduct.

Building confidence in international property

By promoting the highest standards of professionalism in the overseas property industry, the Association of International Property Professionals (AIPP) has been set up to provide the consumer with confidence, and the industry professionals with a united voice.

We do not sell property. We are a non-profit organisation whose sole aim is to improve the standards of professionalism in the international property market, helping the industry and the public.

Thousands of people are buying overseas property: for holidays, for living or for investment. Millions are spent each year on overseas property, in Europe, in the Americas, in Asia and beyond. Consumers are left at the mercy of their own research into companies, their history, their service, their reliability. Now that can change.

The AIPP will set the standards in this industry, improve the service to the consumer and make sure that the public understands what it means when they see the AIPP Member logo on company literature.

AIPP Members have voluntarily signed up to follow the AIPP Code of Conduct, a code established to help consumers by showing where they will find professional companies; it is an illustration of each Member’s commitment to high standards in their work.

Members must act with honesty, transparency and integrity in all the dealings with the public and with the industry. For full details of the Code of Conduct and the AIPP Disciplinary Procedure, to which all Members have also agreed to be bound should the code not be followed, click on the highlighted links.

There is a full list of Members on this website; you can search by company name, membership number or simply view the full list.

To find out more about the work of the AIPP and how it will benefit the international property world, please call us on +44 (0)20 7409 7061 or email memberinfo@aipp.org.uk (industry) or enquiries@aipp.org.uk (consumer).

http://aipp.org.uk

Posted by Ashley Tiernan
International Sales Manager Iguana Company Limited

Jones Lang LaSalle awarded Superbrand status

Jones Lang LaSalle, a professional services provider specialising in real estate, has been awarded Superbrand status 2009 by Superbrands Thailand.
The largest international property services firm in Thailand with over 860 staff, Jones Lang LaSalle has been the only real estate services provider in the Kingdom certified by Superbrands based on criteria that include market dominance, longevity, goodwill, customer loyalty, and overall market acceptance.

The Superbrand status is the latest addition to a number of recognitions obtained by the firm worldwide this year such as the Watkins 2009 Survey’s Best Overall Provider of Corporate Real Estate Services, FORTUNE Magazine’s list of World’s Most Admired Companies, The Ethisphere Institute’s list of World’s Most Ethical Companies, and Corporate Responsibility Officer Magazine’s 10th annual 100 Best Corporate Citizens List.

Suphin Mechuchep (pictured right), managing director of Jones Lang LaSalle (Thailand), received the Superbrand trophy from Steve Dodgson (left), CEO of Superbrands, at the recent Superbrands Tribune Event in Bangkok.

Posted by Ashley Tiernan
International Sales Manager Iguana Company Limited

WEALTHY BUYERS START ASIAN REVIVAL

Wealthy buyers are returning to key markets in Asia, prompted by low interest rates and government stimulus, according to analysts. Domestic investors who have been waiting for prices to bottom are driving most of the demand, although there is also some expatriate and cross-border activity.

CBRE’s Asia Investment MarketView for the first half of 2009 showed that real estate investment rose by 41% to US$12.4 billion in the second quarter of the year. “In the major commercial centres of Shanghai, Guangzhou, Singapore, Seoul and Hong Kong we’re seeing exceptional activity at the luxury end,” said CBRE Research Asia’s executive director Andrew Ness. “Some cities are relaxing restrictions on foreign buyers but the bulk of the market is domestic.”

Jones Lang LaSalle’s chief executive for Asia Pacific, Alastair Hughes, told the Bangkok Post that residential prices at the top end of the market are “bouncing back,” signalling the beginning of economic recovery. Transactions in Singapore are coming mostly from local buyers, while Shanghai, Beijing and especially Hong Kong are seeing more ex-pat activity, he said.

Interest rates plummet
Buyer transactions represent the release of pent-up demand following the end of many months of price falls. But it is also being encouraged by very favourable credit conditions and government actions, said Ness. The three-month SIBOR (Singapore interbank offered rate) has fallen to its lowest rate in at least ten years, 0.4871%, while Hong Kong’s HIBOR is at a five-year low of 0.21786%.

“We’re in an environment of unprecedented low interest rates and governments have scrambled to make lending much cheaper,” said Ness. “In Hong Kong, for example, some banks will actually lend at the HIBOR for the first year of the mortgage.” He also highlighted actions such as the Korean government’s cancelling of capital gains tax and the easing of loan-to-value ratios on secondary mortgages as having positive effects.

Resort buyers
While Bangkok has seen little improvement, other parts of Thailand such as Phuket, Pattaya and Koh Samui have experienced an increase in activity at the upper end of the market, said Japhy Goldman of agent Exclusive Properties. “Things took a short breather but prices have not dropped significantly and now it’s peak season we’re getting more traffic.”

Transactions have actually been improved by the loss of jobs in financial centres like Hong Kong and Singapore, he added. “Some people who are close to retirement don’t want to go back to the job market are moving here and hoping they’ll be able to do business over the internet. Because they’re buying primary residences they are prepared to pay more. We’re getting more and more enquiries all the time.”

Published by Ashley Tiernan

International Sales Manager Iguana Company Limited

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