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Race for Rare Sites

07 Mar 2018

Demand for prime sites has remained strong with developers continuing to acquire sites for all types of development.

Land prices have dramatically increased, especially in the most prime locations and along mass transit lines.

The biggest land sale in Thai history was the recent acquisition of the British Embassy site by the joint venture between CPN and Hong Kong Land for 420 million pounds. SC Asset paid a record price per square wah of 3.1 million Baht for an 880 square wah development site on Soi Langsuan.

There were also other downtown site acquisitions that have not been publicly announced including a site on main road Sukhumvit, as well as Origin Property’s purchase of a 13-rai site on Soi Thonglor 10, where the price was not disclosed.

Not only freehold sites, but more leasehold land plots are being sought after.

Land and House announced that they would sign a 30-year lease for an approximately 6-Rai site on the corner of Sukhumvit 10. The developer plans to develop a mixed-use project comprising an office, hotel, and retail component where construction is expected to start in 2019. Ananda Development signed a 30-year lease for a one Rai site on Sukhumvit Soi 8 with plans to develop a low-rise hotel.

Last year, Raimon Land signed a 30-year lease for a 6-Rai site on Ploenchit Road, opposite Central Embassy for an office development; Dusit Thani has renewed their lease for a 24-Rai site on Rama IV Road with the Crown Property Bureau and will redevelop the site together with CPN. Origin Property’s also subleased a 3.5-Rai plot on Sukhumvit 24, opposite their recently acquired Park 24 condominium project, with plans to develop a mixed-use development comprising an office and serviced apartment.

Although there has been continued expansion of mass transit networks that connect outer Bangkok suburbs to the city centre, the real competition for site acquisition has been in the core areas of Bangkok comprising Central Lumpini, early Sukhumvit Road up to Sukhumvit 55, and Sathorn and Silom roads.

Developer’s aggressive central business district (CBD) site acquisitions have led to a spike in land prices. There is fierce competition from Thai developers with strong financial backgrounds together with funding and support from foreign joint venture partners.

We believe that the intense competition will persuade more land owners to sell as prices become more and more attractive.

The Treasury Department of the Ministry of Finance reported that land prices are rising by double digits in downtown Bangkok. While the Real Estate Information Centre’s (REIC) undeveloped land price index increased 13.2% Y-o-Y in 2017.

Another reason for land owners to consider selling is the proposed new land tax that penalises owners of unutilised land and the proposed change of the basis of value used to calculate withholding tax, from using the official government assessed value to the actual selling price which will increase the tax amount substantially. The date for the new taxes to come into effect and the exact details of the taxes have yet to be finalised.

An article written by Tornbonkot Patcharaprakiti, senior analyst, CBRE Research & Consulting, CBRE Thailand for Bangkok Post dated 7 March 2018.