Developers Step up Investment Land Purchases
Listed property companies have set aside investment budgets worth around Bt60 billion combined to buy land this year for the development of residential projects and investment overseas through to the end of next year.
Many of them have expressed confidence that the domestic property market will start to pick up pace this year due to the government’s investment in infrastructure projects – and in mass-transit routes, in particular.
“We have set an investment budget of Bt14 billion this year to purchase undeveloped land for the development of residential projects this year and next, because we are confident Thailand’s property market will maintain [annual] growth of between 5 and 7 per cent through 2020.
“This is thanks to the government’s strategy to expand the investment in infrastructure projects, such as 10 new mass-transit routes in Bangkok and its suburbs and other rail systems, such as double-track rail and high-speed trains,” said Pruksa Real Estate’s president and chief executive officer, Thongma Vijitpongpun.
The government’s investment in infrastructure projects such as railways and motorways will drive up land prices along the routes, especially in areas close to the expanded mass-transit system in greater Bangkok, he said.
For example, land prices around BTS Skytrain and MRT Metro routes that are already in operation have roughly doubled since the projects were commenced, while the price of land around the Purple Line route from Bang Sue to Bang Yai has risen by 20-30 per cent since construction started on the route five years ago.
“We believe that this is the best time to buy undeveloped land for the development of residential projects in the future, by focusing on locations close to the mass-transit routes,” Thongma added.
Land & Houses, meanwhile, has also earmarked an investment budget of Bt14 billion this year, half of which be spent on buying undeveloped land and the remainder on purchasing and renovating an apartment project in the US, and on developing hotels in Thonglor and Pattaya.
“Although we estimate the property market this year will [only] grow by between 1 per cent and 2 per cent, we have to invest to buy land to serve our business investment needs this year and next in both Bangkok and the provinces.
“If the government starts to invest in infrastructure in the second half of this year, land prices in Bangkok and the provinces will start to rise. This is therefore a good time to buy land to meet our investment requirements for this year and 2017,” Land and Houses president Naporn Sunthornchitcharoen said.
With other leading property firms – both listed and non-listed – also planning to buy land for residential development.
Their combined investment for land for residential development is around Bt60 billion, as detailed in the accompanying graphic.
New projects worth over Bt200 billion
The investment in undeveloped land this year is crucial to these companies’ plans to develop residential projects worth over Bt200 billion combined until the end of next year in Bangkok and the provinces.
For example, Pruksa Real Estate plans to launch between 60 and 65 projects worth Bt50 billion-Bt54 billion over the course of this year.
Supalai plans 35 project launches worth Bt36.57 billion, and LPN Development plans 12 new projects worth Bt20 billion – 11 of them in Bangkok and the other in Cha-am.
Land and Houses, meanwhile, has announced plans to launch 14 residential projects worth Bt23.5 billion in total by the year’s end.
“We are confident Thailand’s economy will recover this year thanks to the government’s investment in infrastructure projects and also the measures [it launched] to support the property market from the last quarter of last year till April this year. As a result, we still plan to launch more residential projects this year,” Supalai CEO Prathep Tangmatithum said.
Debentures the preferred funding option
With aggressive investment for both the purchase of undeveloped land and the development of homes for sale, most leading property firms intend raising funds by issuing debentures.
Pruksa Real Estate plans to issue a debenture worth more than Bt6 billion to pay back another debenture that will expire this year.
Land and Houses, meanwhile, will issue a Bt12-billion debenture, with tranches split equally between the two half-years.
Up to Bt9 billion of the proceeds will be used to pay back its existing debenture that is due to expire this year, with the remainder available for its investment programme.
Lalin Property also plans to issue a debenture worth Bt1 billion to support its investment plan.
Debenture issuance is currently the preferred choice for many developers wishing to raise funds, as the interest they have to pay is lower than the cost of borrowing from a bank.
“Our funding cost now averages 3.3 per cent, but when we launch our new debenture this year, we will offer an interest rate of below 3 per cent. This will help us cut our financial costs,” said Land & Houses managing director Adisorn Thananun-Narapool.
Source: The Nation – 22 January 2016