Published on Bangkok Post dated 3 July 2011 by Aliwassa Pathnadabutr, Managing Director of CB Richard Ellis Thailand

The property industry is one that many past governments have neglected and left to fend for itself, although it is a crucial element of the economy and forms the basis of many other businesses. A boost in the industry will assist in job creation and stimulate related industries such as tourism, banking, construction, raw materials, etc. As today is election day, we have prepared a checklist for whoever forms the incoming government to consider.

INCREASE DEMAND FOR OFFICE SPACE
Prior to 2004, demand for office space ranged from 200,000 to 300,000 square metres per year. However, in 2005 demand dropped to below 100,000 square metres and reached the bottom in 2009 at 46,000 square metres.The office sector is stagnant and lacks the stimulus to grow, but it is an important sector that directly affects other property sectors and offers jobs for new graduates. The majority of office tenants are multinationals, which create not only job opportunities and transfer of technology, but also rental demand from expatriate tenants for apartments and condominiums.

To stimulate office space demand from multinational companies, it is essential for the government to come up with an incentive package to draw in specific industries. The incentive package needs to extend beyond a simple tax break and to offer a one-stop service for new multinational entrants including assistance such as office set-up and fewer work permit restrictions. While Thailand cannot compete with Hong Kong and Singapore as a financial hub, it could,for example, focus on its strength in the service industry and establish the country as a regional hub for hospitality training and services at a fraction of the cost of office space compared to other key Asian cities.

SPUR FOREIGN DEMAND FOR THAI PROPERTY
The Thai property market has great potential to draw in foreign investment and appeals to investors in terms of location, price point and lifestyle. Since the 2008 global economic crisis,foreign demand has slumped and has yet to return. There are multiple ways the government can stimulate foreign demand for Thai properties.

The idea of leasehold term extension has been floated time and again, but no government has seriously considered it.

A market such as Phuket is losing its competitiveness to regional rivals such as Cambodia and Malaysia which both offer 99-year lease terms. An extension of the lease term will lift demand for luxury and high-end villa properties,which will then generate additional tourism receipts.

An increase in foreign ownership quota for condominiums can also be applied to selective resort destinations where the majority of property demand is foreign, such as Pattaya and Phuket.

With a 49% foreign freehold ownership quota,many condominiums in a foreign-dominated market face a halt in sales as the quota is filled,while no local demand is generated for the remaining units. An increase in the foreign quota beyond 49% would assist developers in these markets.

A key factor that will facilitate foreign investments is for local banks to offer mortgage facilities to foreign purchasers. Amending the 1991 Condominium Act to relax the requirement for fund transfers from abroad for property purchases by a non-resident will open up the sector to a wider foreign market as this would allow foreigners to obtain and use local funding for their purchases. The laws should be relaxed;local banks should be encouraged to offer foreign purchasers mortgage facilities, albeit at a premium and with stricter repossession  rules. This will trigger growth in demand ad prices, and boost the local banking industry.

AMEND OBSOLETE LAWS
Amendments should also extend to city planning, zoning and building regulations. More planning is required to promote developments in the right areas and to match the pattern of population movement and infrastructure development. All factors should go hand in hand to ensure that developers build to serve current and future demand.

INCENTIVES FOR FIRST-TIME HOMEBUYERS
With the cost of living and interest rates on the upswing, it will become more challenging for first time buyers to afford their own homes.The outgoing government has implemented policies to support first-time homebuyers to some extent through the Government Housing Bank's programme which offers a 30-year mortgage with a two-year interest-free loan for properties valued less than three million baht. The new government should follow through with similar policies to assist existing and new first-time home buyers by offering special loan terms, fixed interest rates for existing buyers or waiving transfer fees for their first property.

CREATE NEW TOURIST DESTINATIONS
The tourism industry is one that has been promoted, but without a clear strategy. There has been a call to double tourist numbers,but this needs to be supported by new destinations. Given Thailand's strength in tourism, the new government should set clear objectives to make it the top destination in Southeast Asia. This will generate benefits across the board to small vendors, hospitality workers and business owners.

Thailand needs a focused strategy to achieve this and to create new destinations with better planning and ensuring there is sufficient supporting infrastructure to sustain long-term growth. To date, only key destinations such as Bangkok, Phuket and Pattaya have been promoted and exposed in international markets and tourist arrival statistics in these destinations are encouraging. However, the government should do more to create new destinations and opportunities for hotel developers in newmarkets. At present, Bangkok is oversupplied with hotels in all grades. With new destinations and opportunities, hotel developers can be steered toward investments in new markets. The development of Marina Bay as a new destination in Singapore, for example, has boosted Singapore's tourism and hotel industry.

The above are five simple suggestions for the new government to consider, some of which can be implemented within three months with impact that could be seen before year's end. But along with these, the most important factor is political stability, which if achieved would be the key driver of foreign and local demand for Thai properties.

"A boost in the industry will assist in "job creation and stimulate related industries such as tourism, banking,construction, raw materials, etc."

--------------------------------------------------------

To watch a live interview on this topic, please click here for English and Thai versions.