Raimon Land 's Condominium Focus

Condominium Focus Thailand

UPDATE OF INNER-CITY BANGKOK AND KEY RESORT AREAS

Specially Produced By

7TH EDITION MAY 2008

03

Executive Summary

Nigel Cornick Chief Executive Officer Raimon Land PLC

It is a pleasure to present you with the latest edition of Raimon

Developers in Thailand's resort areas remained hesitant in 2007

Land's Condominium Focus Thailand, now in its fourth year.

due to uncertainties in new amendments to the Foreign Business

We trust this most recent issue provides the relevant information

Act. However, strong absorption from foreigners, who rushed to

prospective buyers need concerning when to buy, where to buy

buy condominiums with available foreign ownership titles, pushed

and current market values for condominiums in Thailand.

the total market value for resort condominiums to THB17 billion, up 12% from 2006.

Raimon Land's analysis draws on a wide range of factors to present a balanced, realistic survey into the current market

Locations close to Bangkok, where the market experiences a

situation. It examines new project launches in the context of

balanced Thai-foreign demand, were the most active. Pattaya

annual and cumulative unit sales, price per square metre (psm),

led with THB6.6 billion sold in 2007 followed by Hua Hin with

location, take-up rates at projects under construction and

THB6.3 billion sold.

completed transfers. It also employs economic indicators to provide a more precise outlook for 2008.

Koh Samui and Phuket, which depend on international investors for around 90% of the demand, were greatly affected by the

Despite a tough political climate, the inner-city Bangkok

regulation limiting foreign allocated units to 49% of the total

condominium segment inched ahead 3% in 2007 to reach THB

inventory. This prompted the postponement of new launches,

43.7billion. Condominiums have become the fastest growing

especially among small under-capitalised developers who depend

segment in the residential property market due to structural

on early booking rates. This precipitated a healthy 61% take up

changes impacting local demand for homebuyers, with luxury

rate in 2007, with buyers snapping up 96% of the units in newly

developments emerging as an alternative for many local investors.

completed developments.

A second half surge in Bangkok condominium demand in 2007

Resort areas are benefiting from very low availability in completed

brought the year-end sales tally to 6,214 new units. Achieved

supply, driving up prices in both resale and off-plan developments.

prices and sales performances in high-end developments were

In 2007, close to a quarter of the units sold in resort areas were

particularly strong, with investors prepared to pay an additional

priced over THB100,000 psm, and the number of seaview/

50% or more on top of the median price to secure the finest

beachfront units available for less than THB100,000 psm is

inner-city Bangkok properties.

rapidly falling.

Completions of new condominiums have picked up, with 5,100

In the first quarter of 2008, the industry confirmed its recovery

units added in 2007 compared to the 6,940 units launched.

sparked in the last quarter of 2007 and, we believe, this

The supply/demand balance remains healthy with about 92%

document will clarify the market situation and provide useful

of the units in newly completed developments being sold.

evidence of trends for investors, the media and observers alike.

Performance in projects that have already started construction

We hope you find this issue of Condominium Focus Thailand

on the main structure and those that are still in earlier construction

informative and enlightening and, as always, we continue to

stages is similarly impressive.

invite your comments or suggestions. Š2008 RAIMON LAND RESEARCH

04

Methodology and Disclaimer Methodology The information contained in this report covers the condominium projects surveyed which have a majority of units priced at over THB2 million. The data covers only condominium projects that have been launched since January 2003 as Raimon Land believes that this marked the starting point of the recovery in the Thai condominium market.

Raimon Land collects this data by surveying the listed projects on a monthly basis through a variety of sources comprised of site visits, interviews, press articles, investor research on listed companies and other research agency reports.

For more information on the data and/or methodology included in this report, please contact the Raimon Land Research Team at +66 (0) 2651 9600. This document can be downloaded from www.raimonland.com

Disclaimer Although Raimon Land sets the highest possible standards for its research, it cannot be held responsible for any inaccuracies that occur. As a result, Raimon Land accepts no liability for any errors and/or omissions contained within this report.

Any reliance upon the information contained in this report shall be at the sole risk of the user.

Delivering Asia Communications This publication was produced and compiled by Mark Armsden and David Johnson of Delivering Asia Communications www.deliveringcommunications.com

Š2008 RAIMON LAND RESEARCH

05

Contents Section One - Welcome Executive Summary

03

Methodology and Disclaimer

04

Contents

05

Section Two - Macro Trends and Economic Indicators Key Figures

07

Regional Economic Indicators

08

Index Indicators

09

Macro Economic Indicators

10

Property Indicators

11

Tourism Indicators

12

Regional Property Indicators

13

Section Three - Market Perceptions Institutional Investors

14

Section Four - Inner-City Bangkok Condominiums Executive Summary

17

Condominium Projects - Launches 2003-2008

18

New Launches

20

Demand

21

Supply/Demand

22

Completed Stock

23

Transfers

24

Inner-City Bangkok - Outlook and Key Conclusions

25

Section Five - Resort Area Condominiums Executive Summary

27

Condominium Projects - Launches 2003-2008

28

New Launches

30

Supply/Demand

31

Demand

32

Completed Stock

33

Tourism

34

Global Buyers

35

Market Perceptions - Resort Areas Round Table

36

Resort Areas - Outlook and Key Conclusions

42

Š2008 RAIMON LAND RESEARCH

Section Two Macro Trends and Economic Indicators Thailand

Š2008 RAIMON LAND RESEARCH

07

Key Figures Macro Indicators

Indicators Q1/2007 Q2/2007 Q3/2007 Q4/2007 GDP GDP % 4.3 5.7 4.8 4.2 Inflation Consumer Price Index (CPI) % 1.9 2.9 1.6 2.4 Trade Indicators Exports (USD mn) 35,916 42,262 38,790 34,180 Imports (USD mn) 34,676 37,789 35,847 30,862 Trade Balance (USD mn) 1,240 4,473 2,942 3,318 Current Account Balance (USD mn) 1,121 6,183 2,928 4,689 Finance External Debt (USD mn) 59,030 61,486 60,560 59,832 International Reserves (USD mn) 73,000 87,455 80,687 70,863 Exchange Rate (Baht/USD) 34.6 33.9 34.0 35.5 MLR % 7.00 6.85 6.85 7.50 Consumer Confidence Consumer Confidence Index 77.1 76.3 75.8 79.1 Auto Sales 154,244 158,812 179,925 138,270 Stock Market SET Index 777 858 845 674 Property Sector Index 124 128 129 108 Property Indicators Housing Project (Units) 6,708 7,308 5,837 5,527 Apartment and Condominium (Units) 3,55 2,055 4,353 2,872 Self-Built Housing (Units) 86,306 4,418 3,908 7,232 New Housing in Bangkok Metropolis 15,631 16,572 13,781 14,098 and Vicinity Outstanding Loans with Commercial 682,366 702,703 734,663 p 661,893 Banks - Housing Sector (THB mn)

QoQ % Change

2006

2007

YoY % Change

5.7%

5.1

4.8 p

4.8%

2.9%

4.7

2.3 p

2.3%

9.0% 5.4% 52.0% 111.2%

127,941 126,947 994 2,174

151,147 139,174 11,973 14,921

18.1% 9.6% 1103.9% 586.3%

1.5% 8.4% -0.3% 0.0%

235,109 66,985 37.9 7.25

240,908 87,455 34.5 6.85

2.5% 30.6% -9.0% -5.5%

0.7% 3.3%

83.0 679,264

76.3 631,251

-8.1% -7.1%

2% -0.8%

680 113

858 128

26.2% 13.3%

25% -53% 13% -2%

29,947 15,843 26,933 72,723

25,380 12,838 21,864 60,082

-15% -19% -19% -17%

4.5%

648,700 734,663 p

13.3%

Source: Bank of Thailand, National Economic and Social Development Board, Toyota Motor, Thai Chamber of Commerce University, and Stock Exchange of Thailand Remark: P = Preliminary figures

GDP

Thailand’s economy expanded 4.8% in 2007, finishing with a robust 5.7% growth rate in the final quarter on momentum that began earlier in the year.

Inflation

The consumer price index shows the inflation rate averaged a relatively low 2.3% in 2007 after running as high as 4.7% the year before.

Trade

Exports jumped 18.1% to USD151.15 billion in 2007 on the back of a weak US dollar, while imports climbed 9.6% to leave a record trade surplus of USD12 billion.

Finance

The Thai baht appreciated 9% to an average of THB34.5 against USD1 in 2007, triggering international reserves to soar 30.6% to THB87.455 billion while the minimum lending rate fell from 7.5% to 6.85% during the year.

Consumer The consumer confidence index fell 8.1% year-on-year, which is reflected in the 7.1% drop in auto sales, though on Confidence increasingly stronger quarterly performances.

Stock Market

The Stock Exchange of Thailand climbed 26% in 2007 to close the year at 858, while the country’s property index rose 13.3% to 128.

Property

New housing registrations dropped 16.5% year-on-year to 60,082 units.

©2008 RAIMON LAND RESEARCH

08

Regional Economic Indicators

Country

GDP Growth in 2007 %

GDP at current prices (Billion USD)

GDP per capita at current prices (Units USD)

Population (Millions)

China Hong Kong India Indonesia Malaysia Philippines Singapore Taiwan Thailand Vietnam

11.4 6.0 8.7 6.3 6.0 7.2 7.5 5.5 4.8 8.5

3,248 203 1,090 410 165 141 153 376 226 69

2,460 29,149 965 1,824 6,146 1,590 34,152 16,274 3,400 809

1,321 7 1,130 224.9 26.7 88.7 4.5 23.1 66.4 85.6

Source: International Monetary Fund, NESDB Complied by: Raimon Land Research

Š2008 RAIMON LAND RESEARCH

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Index Indicators Stock Exchange of Thailand (SET) General Index (2003-2007)

Index Points

1000 858

900 800 700 600 500 400 300 200

2003

2005

2004

2006

2007

2008

Source: Stock Exchange of Thailand

• The Stock Exchange of Thailand (SET) marched ahead 26% in 2007 to close the year at 858 • After a robust 2003, the SET more than doubled from 370 to 772, the Thai stock index settled into the 600 range • It flirted above 700 in mid-2005 and again immediately after the coup in 4Q 06 • The SET then shot past the 800 mark in July and breeched 900 in October before settling back to the mid-800 level

Consumer Confidence Index (2000-2007)

Index Points

120 100 76.3

80 60 40 20 0 2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: Thai Chamber of Commerce

• The Consumer Confidence Index (CCI) has been falling since 2004, reaching a low in 2007 • This sentiment is also reflected in the strong 2H 07 performances in Thailand's property index (page 11) • The CCI bottomed in 2001 at 69.9 before recovering with two major jumps that landed it at 109.9 in late 2003 • It then went into decline, finally bottoming at 75.8 before stabilising, where it is forecast to grow throughout 2008

Total Car Sales Index (2000-2007)

Car Sales - Number of Units

800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2000

2001

2002

2003

2004

2005

2006

2007

Source: Toyota Motor Thailand

• Domestic auto sales fell for the second consecutive year in 2007, tumbling 7.1% year-on-year to 631,251 units • Sales started picking up in July, topping the 2006 results month-on-month throughout most of the second half • This is further exhibited in the 4Q 07 results which jumped 13.3% quarter-on-quarter • Car sales had put in a spirited performance from 2000-2005, when they more than doubled from 261,533 to 703,432 units • However, stronger performances throughout 2007 have paved the way for positive growth in 2008

©2008 RAIMON LAND RESEARCH

10

Macro Economic Indicators Consumer Price Index (% change - 2005-2007)

Growth Rate

7 6

5.7

6

6

5.7

5 3.7

4

3.6

3.3 2.9

2.8

3

2.4 1.9

2

1.6

1 0

Q1/05

Q2/05

Q3/05

Q4/05

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

Source: The National Economic and Social Development Board

• Thailand's inflation rate remained low in 2007, averaging 2.3% throughout the year • However, a sharp leap from 1.6% to 2.9% in 4Q 07 during the national election period was much higher than expected • The forecasted inflation rate of 3.2-3.7% in 2008 reflects this trend will continue • In 1Q 05, inflation climbed over 12-months to 6%, where it remained through the second quarter of 2006 • The rate plummeted to 3.6% after the September 2006 coup and continued to fall, finally bottoming at 1.6% in 3Q 07

Real GDP Growth (% change - 2000-2007)

Growth Rate

9

8.3

8 7

6.9

6.5

6.7 6.3 5.9

6

5.7

5.5

5

4.5

4.0

4

4.8 4.3

3

4.2

3.6

2

2.4 1.7

1 0 2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: The National Economic and Social Development Board

• • • • •

Thailand's gross domestic product (GDP) climbed 4.8% year-on-year in 2007, slightly lower than the initial 5% forecast An encouraging 5.7% jump in 4Q 07 bodes well for the forecasted GDP growth range of 4.5-5.5% in 2008 After struggling at around 2% in 2001, the economy began to climb, reaching a high of 8.3% in 4Q 03 Economic expansion was in the 4.5-6.5% range from 2004 until the military coup in September 2006 However, since mid-2007 GDP has continued to climb

Exchange Rate (THB - USD average-2000-2007)

THB - 1USD

50 45 41.25

40

43.17

35

33.87

30 25 20

2001

2002

2003

2004

2005

2006

2007

2008

Source: Bank of Thailand

• The baht appreciated 9% year-on-year in 2007 to an average of THB34.5 against USD1 • However, the rate of the baht's appreciation significantly slowed in 4Q 07 and ended at 33.87 to the USD • Analysts predict the baht could appreciate in the 6% range against the dollar in 2008, and expect the exchange rate to average THB32.6 during the year

©2008 RAIMON LAND RESEARCH

11

Property Indicators Index Points

Stock Exchange of Thailand (PROP) Property Index (2003-2007)

250 200 150

128

100 50 0

Jan-03

Jun-03

Nov-03

Apr-04

Sep-04

Feb-05

Jul-05

Dec-05

May-06

Oct-06

Mar-07

Aug-07

Jan-08

Source: Stock Exchange of Thailand

• The Stock Exchange of Thailand's (SET) Property Index grew at a much slower pace than the SET in 2007, ending the year 13.3% ahead of 2006 at 128.03 after decelerating from a July high of 137.24 • The PROP burst through the 100 barrier in June 2003 and was closing in on 200 by December • The index's performance remained lacklustre throughout 2005 and 2006, struggling to stay above 100 • It jumped back in the early months of 2007 before moving solidly past 120 in June

Minimum Lending Rate % (2000-2007)

Percentage Per Annum

8.5 8 7.5 6.85%

7 6.5 6 5.5 5 4.5 4 2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: Bank of Thailand

• • • • • •

The Minimum Lending Rate (MLR) began tumbling in 2007, ending the year at 6.85% This pointed to a trend of falling rates from a 2006 peak of 7.5% The MLR started the millennium at 8%, but gradually stepped down to 7% by late 2001 where it remained Incremental quarterly cuts sent the rate to 5.5% in mid-2003 When the Bank of Thailand began increasing its interest rates, the MLR increased to 7.5% in 2Q 06 It had dropped to 6.85% in the third quarter of 2007

New Housing in Bangkok and Vicinity (2000-2007)

Unit Registration

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: Bank of Thailand

Housing Project

Apartment and Condominium

Self-Built Housing

• The number of new housing projects and self-built houses advanced in 2007 • A slowdown in new housing launches in 2007 triggered a 16.5% drop in overall registrations during the year to 60,082 units from the 72,723 approved in 2006 • Housing projects represented 42% of total registrations in 2007, self-built houses 36% and apartments/condominiums 21% • Approvals climbed from around 32,000 in 2000 to over 50,000 in 2003 • Continual quarterly growth in 2004 and 2005 saw the yearly total go over 60,000 • A surge in apartments/condominiums during 2006 accounted for much of the high number that year

©2008 RAIMON LAND RESEARCH

12

Tourism Indicators Phuket-based managing director of property consultancy C9 Hotelworks, Bill Barnett, provides his views on the role Thailand's tourism industry plays in the development of its property industry.

What role has the travel industry played through offering

Branding is a global

international visitors experiences in Thailand that drives their

phenomenon and no

decision to consider investing in a second home or investment

industry is immune to this.

property?

The market currently

First impressions are everything for the first time tourist. Great experiences lead to repeat visits and ultimately potential investors for property. It’s a matter of creating a large-scale pre-qualification pool of resort and investment home buyers who are already familiar with the market and drawn to Thailand by its unique selling points. In a market such as Phuket, which in 2007 landed over 5.4 million tourists, the numbers are significant in catchment terms. Destinations and brand names play a large role as well.

Look back to the 1990’s where Bali in Asia Pacific was the leader, and fast forward into 2007 where Phuket has become the envy of the regional resort real estate industry.

produces brand pricing premiums of 20-50% more for the international managed properties. If you are buying for investment or rental returns its logical to look to fundamentals, and with large chains operating at higher occupancy and rate levels along with global sales and marketing networks then it just makes good sense to buy on business basics such as a property in an international hotel managed project.

Are investors in Thailand's resort destinations more comfortable

What role do you see the hospitality industry playing in the future to raise the profile and perception of Thailand as an

investing in a development with a global company managing it and is this option more attractive for Thai investors? Why? Most buyers look at key sales attributes, and there is a dividing

upscale travel and lifestyle destination?

Tourism and property are effectively a one-two punch and to a point the resort real estate market is driven by tourism. Within an integrated destination resort such as Laguna Phuket which has five international-class hotels, a golf course and resort residential products, over 50% of the total revenue of the estate comes from a variety of real estate offerings. From a customer standpoint the typical buyer has already stayed in one of the resorts three to five times hence they are attracted to both the brand and making a long-term investment.

line between those seeking a longer-term capital appreciation and perhaps primary residence and those looking at purely a yield-based investment. Resort real estate also becomes more complicated when you add in preferences for oceanview or beachfront property which commands premiums. The overseas market has been dominated by destinations such as Phuket or Koh Samui, while domestic purchasers have flocked to Hua Hin and Pattaya. Affluent Thai buyers tend to look at the ability to finance purchasing units. Oversees investors who are paying cash for units more often look at brand managed or investment

What role are properties managed by five-star hotel chains playing in driving property demand from investors?

yielding units which they also can tie in with vacations and useage rights.

International Tourist Arrivals to Thailand (2000-2007) Total

2000

2001

2002

2003

2004

2005

2006

2007

9,508,623

10,061,950

10,799,067

10,004,453

11,650,703

11,516,936

13,821,802

14,401,336

Arrivals in Millions

16 14 12 10 8 6 4 2 0

2000

2001

2002

2003

2004

2005

2006

2007

Source: Tourism Authority of Thailand

• International tourist arrivals rose 4.2% year-on-year to 14.4 million in 2007 • Tourism revenue came close to the expected THB545.5 billion • East Asia continued to dominate with a 56% share followed by Europe (22%) and the Americas (6%), with Russia, India and the Middle East continuing as emerging markets • The Tourism Authority of Thailand has announced a 2008 goal of 15.7 million foreign arrivals matched by a marketing campaign to generate a 10% jump in revenue to THB600 billion

©2008 RAIMON LAND RESEARCH

13

Regional Property Indicators International Property Prices Bangkok stands out as one of the most affordable cities in East

values in Bangkok's high-end market eased ahead 5% to

Asia when comparing the average price of its luxury residential

USD117 psm, by far the lowest rates in the region. Though

properties to those in other major regional urban centres, based

Beijing's rate actually fell 6.8% to USD163 psm, it is still 40%

on achieved transactions in completed developments. For similar

higher than Bangkok, while Shanghai climbed 6.6% to USD193,

grade properties, Bangkok's average price of USD2,425 per

a significant 65% higher than the Thai capital. Hong Kong's

square metre (psm) is almost one tenth that of Hong Kong's at

rental value in 2007 climbed 17.3% to USD651 psm, substantially

USD20,899 psm and Singapore (USD20,468 psm). While

ahead of Singapore's USD547 psm, which skyrocketed 46.3%

Beijing posted a slightly lower price of USD2,026 psm in 2006

from the USD374 psm achieved in 2006.

compared to Bangkok's USD2,051 psm, rates in the Chinese capital soared over 40% to USD2,873 psm last year while those

While yields dipped across the board, the highest rates were

in its Thai counterpart climbed a slower 18.2%. Beijing's surge

posted by Beijing (5.5 - 7.5%), Shanghai (4.8 - 7.7%) and

closes in on Shanghai's USD3,158 psm (+20%), leaving

Bangkok (4.8 - 5.1%). Given that Thailand has grown at a much

Bangkok's upper-end properties the most affordable of any major

slower pace than its booming Asian counterparts, Bangkok's

city in the region, a comfortable 18.5% less than Beijing and

residential property market can expect a strong upside. High-end

23.2% lower than Shanghai. Prices in Singapore last year

offers in completed developments are still very limited in Bangkok

catapulted 62% over 2006 on their way to catching Hong Kong,

making it difficult to compare to other more devloped markets

where the psm rate jumped 24%, more in line with advances

in the region such as Hong Kong and Singapore. However,

in Bangkok (+18.2%) and Shanghai (+20%), where the average

premium stock will be available in the market from 2008-2010,

price of luxury residences reached USD8,560. Average rental

pushing up resale prices and average rental rates.

International Property Prices

2007 Market Bangkok Beijing Hong Kong Shanghai Singapore *USD/psm/per annum **USD/per sqm

2006

Rental Value*

Capital Value**

Yield (%)

Rental Value*

117 163 651 193 547

2,425 2,873 20,899 3,158 20,468

4.8 - 5.1 5.5 - 7.5 3.1 4.8 - 7.7 2.7

112 175 555 181 374

Capital Value** Yield (%) 2,051 2,026 16,740 2,622 12,631

5.2 8.6 3.3 6.9 3

Source: Jones Lang LaSalle Research

The Severn development on Hong Kong's famed The Peak. Severn boasts unrivalled views of Hong Kong's Fragrant Harbour in a city where condominiums average USD20,899 per square metre (psm), almost more than 10 times Bangkok's average price of USD2,425 psm.

Š2008 RAIMON LAND RESEARCH

Section Three Market Perceptions

As part of the Raimon Land Research Team’s effort to provide in-depth data along with independent analysis and forecasts, we ask some of the region’s leading institutional investors to give their thoughts on the Thailand luxury condominium sector.

How would you rate the Thailand luxury property sector's performance in 2007 and what were the major issues affecting this performance?

The luxury condominium sector performed fairly well in 2007 with moderate increases achieved in average sale prices, aided by positive fundamentals including launches of high-quality new supply, low mortgage rates, and poor stock market performance (as an investment alternative). However, the sector was held back partly by several negative factors, the most significant of which being political instability throughout most

Blake Olafson Senior Vice President Global Real Estate Group, Lehman Brothers

of the year and foreign ownership concerns, as evidenced by the slowing absorption rate.

Out of Hua Hin, Koh Samui, Pattaya and Phuket, which of Thailand's major resort areas will be the best performer in the

What are your predictions for the luxury property sector in 2008 and your reasons behind this conclusion?

coming years and why?

In 2008, Pattaya should gain the most in terms of volume, as

The sector should continue to see moderate growth in 2008, as

one can argue that the timing of the coup prevented it from

buyers (particular foreign investors) gain comfort from the policy

harvesting the demand pickup from the opening of the new

stances of the new government and release the pent-up demand

airport, which cut the commute time to Pattaya by almost an

from the past two years of politically uncertain environments to

hour. The new airport has become one of Pattaya’s strongest

the market. While Bangkok and Hua Hin will continue to remain

selling points and it has also led to an upgrade in the quality

particularly robust due to the amount of demand from Thai investors

of the roads between Bangkok and the city. Some parts of the

that helps fill ownership quotas in condominium developments,

road still have a little way to go, but in 12-24 months, travelling

new policies that are more friendly to foreign investors would

time between Bangkok, the new airport and Pattaya will be

indeed be of great assistance to Phuket, Koh Samui and to a

significantly reduced. Koh Samui should gain the most in terms

lesser extent, Pattaya.

of saleable price per square metre due to the new product offerings, which are of significantly higher standards than what

In your opinion, what three issues are most likely to impact the

were offered on the island in the past. Some of the developments

luxury property sector in 2008?

being launched on Koh Samui are also being managed by

Foreign ownership restrictions, supply risk as well as perception

major international hotel brands that investors trust and this should

of such, and containment of global credit market concerns.

add to their attractiveness as well.

©2008 RAIMON LAND RESEARCH

15

Market Perceptions Institutional Investors

How would you rate the Thailand luxury property sector's performance in 2007 and what were the major issues affecting this performance?

The luxury property market performance was encouraging despite the uncertainty clouding the political scene in Thailand.

With the improved overall outlook for the economy, investors seem less concerned and confidence in the luxury residential sector picked up in 2H 07. The launch of new projects also generated buying interest. Many locations such as Bangkok and Phuket remained attractive destinations for second home owning Asian and non-Asian investors despite the continued strengthening of the Thai baht against the US dollar. A broadening economy, coupled with growth in medical tourism and the wellness and spa market underpinned demand for quality residential assets in the country.

What are your predictions for the luxury property sector in 2008 and your reasons behind this conclusion?

Market issues globally will undoubtedly form the backdrop for any discussion here. The slowdown and credit issues in the US may well weigh on the performance of the luxury property sector, as many of the purchasers are foreign investors.

Nonetheless, anticipated improvement in the overall economy coupled with lower interest rates stemming from the cut in interest rates by the Bank of Thailand should continue to boost sales activity through 2008. Economic growth in Thailand is expected to maintain the 4% to 5% pace over 2008 and 2009.

Consequently, to many Thailand remains fundamentally one of the more attractive Asian destinations.

Out of Hua Hin, Koh Samui, Pattaya and Phuket, which of In your opinion, what three issues are most likely to impact the

Thailand's major resort areas will be the best performer in the

luxury property sector in 2008?

coming years and why?

As mentioned earlier, any unfavourable global market condition

Generally, the four Thailand major resorts mentioned are unique

over 2008 may negatively impact any potential upside in the

markets that tend to attract different groups of investors. Riding

luxury property sector. Any further deterioration in the credit

the tourism boom in the region and the sustainable economic

market will reduce the availability and increase the cost of

growth, demand for quality assets in these locations should

financing, which in turn may slow demand. The new government's

well remain robust. The rapid expansion of the low-cost carrier

ability to inject confidence in both domestic and international

network and flight services to Thailand will also help to underpin

investors would then be essential in boosting market activity.

the tourism industry in these locations. We can see the strength

Policies with a favourable investment mandate and clear

of Phuket and Pattaya continuing. The increasing popularity and

direction will likely attract more investments into the country.

quality of products available in Phuket such as spa and wellness

Any further strengthening of the Thai baht against the US Dollar

facilities provided by smart developers will continue to attract

during 2008 would weaken foreign buying power. This may

keen interest from investors. In addition, prices for luxury

have a minimal impact on the luxury sector as investors could

residential properties in Thailand are still a fraction of those in

view these investments as opportunities to hedge against the

the neighbouring countries, which should still make them

falling greenback. Only time will tell.

comparatively more affordable and attractive to foreign investors. Š2008 RAIMON LAND RESEARCH

Section Four Inner-City Bangkok Condominiums

Inner-City Bangkok Sales Value by Area 2006 - 2007 Sukhumvit Sukhumvit, in the inner-city's northeast, is bordered by Rama IV to the south and Petchaburi in the north, and covers the area from Wireless Road to Sukhumvit Soi 63 (Ekkamai) and Thonglor.

Sukhumvit Road and the BTS sky train bisects the area from east to west.

Central Lumpini Central Lumpini adjoins Sukhumvit in the city centre at Lumpini Park, Lang Suan and the Chidlom shopping district.

Phayathai/ Pathumwan 2006 THB3.3 billion 2007 THB1.5 billion

Silom/Sathorn The Silom/Sathorn commercial district sweeps southwest from Central Lumpini and Soi Yennakart to the Chao Phraya. Silom and Sathorn Roads cut through the middle from Rama IV to the river, with the BTS sky train and MRT subway serving much of the area.

Rama III South and east of Silom/Sathorn, Rama III follows the Chao Phraya River's contour from Charoen Krung in the west to the Ratchadaphisek-Rama IV intersection in the east. Narathiwat Ratchanakarin Road, the expressway and the MRT subway offer access to the area.

Riverside Bangkok's Riverside includes the Chao Phraya's west bank in Thonburi opposite Silom/Sathorn. In Bangkok's inner-city, Riverside area trims the Chao Phraya from Sathorn Road to Rama III, which it follows until meeting Narathiwat Ratchanakarin Road.

Phayathai/Phatumwan Occupying a small area north of Central Lumpini, Phayathai/ Phatumwan covers the area between Petchaburi Road and Victory Monument. Three BTS skytrain stations and the expressway provide easy access.

Š2008 RAIMON LAND RESEARCH

Central Lumpini 2006 THB3.9 billion 2007 THB7.6 billion

Riverside 2006 THB8.4 billion 2007 THB8.8 billion

Silom/Sathorn 2006 THB5.5 billion 2007 THB9.9 billion

Rama III 2006 THB2.5 billion 2007 THB2.1 billion

Sukhumvit 2006 THB18.7 billion 2007 THB13.8 billion

17

Inner-City Bangkok Executive Summary

A revival of “new launches” in 2H 07...

Renewed developer confidence precipitated by strong pre-sale performance prompted a 4,248-unit second-half surge in new Bangkok condominium launches in 2007. This brought the annual total to 6,940 units, 39% fewer than in 2006, but an indication of positive growth for 2008.

…with a highlight on luxury offerings

We observed a rejuvenation of new developments in the luxury segment of the market. Sales performance and achieved prices reached record levels, looking at some developments such as The River and the Sukhothai Residences which achieved THB 250,000 and THB343,000 per square metre (psm) respectively for a combined sold value of no less than THB10 billion.

Market value climbed to THB43.7 billion...

Total sales climbed moderately by 3% in 2007 to reach a total market value of THB43.7 billion, while the average price of a unit sold moved ahead 5.4% to close the year at THB88,757 psm. Sales in luxury units over THB100,000 psm grew at a much faster pace than the market average, accounting for over a third of the total. Units in the top 10 luxury developments fetched a record average of THB145,113 psm.

...with newly completed developments sold out at over 90%

Due to fewer launches coupled with ongoing demand in 2007, the take-up rate for inner-city Bangkok condominium units climbed to 81% compared to the previous year’s 79%. Newly completed developments are 92% sold out, while take-up rates for projects in the construction phase reached 77% and those in the planning or piling stages hit 63%.

New stock is coming fast into the marketplace…

The number of units completed in 2007 jumped over 5,100 units, bringing the cumulative total since 2003 to 12,425 units, or 44% of those launched. That leaves about 18,056 units under development with 4,057 units that have yet to start piling and foundation works. Close to 7,000 units are expected to be completed in 2008.

…with 20% of units being snapped up by foreigners

In spite of the increase in completions, the value of transfers slipped close to 10% year-on-year to THB9.6 billion, with foreigners accounting for 20%. However, a reduction in transfer tax rates to 0.01% is expected to boost the number in 2008.

©2008 RAIMON LAND RESEARCH

18

Condominium Projects Launches 2003-2008 Name of Project

Developer

Number of Units

Launch Date

Construction Progress

SUKHUMVIT Baan Siri Sukhumvit 13 Citismart Sukhumvit 18 Urbana Sukhumvit 15 Hampton Noble Ora The Lakes Plus 49 Royal Lumpini Sukhumvit 41 The Colony Sukhumvit City Resort Siri Twenty-Four The Height Wattana Suite Maison De Siam The Cadogan Baan Siri Sukhumvit 10 Avenue 61 Wilshire Sukhumvit 22 Fullerton The Peak 15 The Madison Siri Thirty-One Tanapat 24 Supalai Premier Place The Forty-Nine Plus Grand Heritage Ficus Lane Le Raffine 31 Silver Heritage Domus Boutique 16 Siri Residence 24 Grand Parkville Asoke The Master Centrium La Vie en Rose The Bangkok @ 61 The Trendy Place Baan Saran Harmony Living The Bangkok @ 43 The Address 42 Nusasiri Sukhumvit - Ekamai Regent Condominium Le Raffine 39 The Clover Condo One Plus Thonglor Emporio Condo One X Sukhumvit 26 Noble Remix Millenium Residences (Ph.1) Von Napa 38 The Wind 23 Noble Solo DLV Thonglor Aguston 22 The Prime 11 Issara @42 The Alcove 49 Ideal 24 The Niche @49 The Rise Siri at 08 Eight Tonglor The Charisma (Phase 1) The Amethyst 39 The Alcove Thonglor 10 Le Luk (Phase 1) Siri @ Sukhumvit Siri at 39 Sky Walk Vicente Sukhumvit Royce Private Residences Noble Reveal 73 Projects

Sansiri Plc. Asian Property Plc. Siamphan Enterprise Major Development Plc. Noble Development Plc. Raimon Land Plc. Plus Property Partners Co., Ltd LPN Plc. In Style Estate Co., Ltd Harrison Development Co., Ltd Sansiri Plc. Fillmore Property Co., Ltd N/A Kijpracha Tanee Co., Ltd KPN Life Style Sansiri Plc. Bangkok Living Development Rasa Property Development Plc. Major Development Plc. New Daily Property Asset Rojana Plc. Sansiri Plc. Tanapat Property Ltd. Supalai Plc. Plus Property Partners Co., Ltd Grand Unity Development Co., Ltd Cinkara Co., Ltd Le Raffine 24 Co., Ltd The Best Condominium Co., Ltd Gayson Property Co., Ltd Boutique land Co., Ltd Sansiri Plc. Grand Unity Development Co., Ltd Growing Infinity Co., Ltd Nation Union Co., Ltd Land & House Plc. Grande Asset Plc. City Living Company Limited Serene Developments Co., Ltd Land & House Plc. Asian Property Plc. Nusasiri Group Co., Ltd Grande Asset Plc. Le Raffine 24 Co., Ltd Top Line Living Co., Ltd Plus Property Partners Co., Ltd TCC Capital Land Ltd. Plus Property Partners Co., Ltd Noble Development Plc. City Development Limited Chokeplus Co., Ltd Major Development Plc. Noble Development Plc. Dalvey Residence Co., Ltd Major Development Plc. Fragrant Real Estate Co., Ltd Charn Issara Plc. Samirano Property Co., Ltd N/A Sena Development Co., Ltd Thai Nissan Rinkai Mark Co., Ltd. Sansiri Plc. Asian Property Development Plc. In Style Estate Co., Ltd Pramesiri Development Co., Ltd Samirano Property Co., Ltd Woraluk Property Sansiri Plc. Sansiri Plc. Woraluk Property KPN Lifestyle Co. Ltd Major Development Plc. Noble Development Plc.

72 200 52 77 210 168 77 166 75 160 150 68 56 24 24 118 79 78 139 26 151 108 71 220 63 68 70 44 29 106 14 185 481 79 78 72 328 48 24 54 214 303 256 59 590 151 360 329 504 302 76 232 572 79 269 196 69 47 34 126 77 74 196 236 79 140 272 460 163 566 35 165 273 Total: 11,816

Feb Mar Apr May May Aug Aug Sep Oct Oct Oct Oct Oct Oct Nov Nov Nov Dec Jan Jan Feb Mar Apr Apr Apr Apr May May May May Jun Jun Jun Aug Oct Oct Dec Sep Oct Nov Sep Jul Dec Sep Feb Mar Mar Jun Jun Jun Aug Sep Sep Sep Sep Nov Dec Dec Jan Mar Jul Aug Dec Mar Mar Mar Apr Apr Oct Dec Feb Mar Mar

03 03 03 03 03 03 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 04 04 04 04 04 04 04 05 05 05 06 04 04 05 06 06 06 06 06 06 06 06 06 06 06 06 06 06 07 07 07 07 07 05 07 07 07 07 07 07 08 08 08

Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction New Launch in Q1 2008 New Launch in Q1 2008 New Launch in Q1 2008

Jan Feb Jul Jul Aug

03 03 03 03 03

Completed Completed Completed Completed Completed

SILOM/SATHORN Baan Siri Sathorn Suanplu Supreme Elegance Silom City Resort Silom Grand Terrace Nanthasiri

Š2008 RAIMON LAND RESEARCH

Sansiri Plc. Supreme Team Harrison Development Co., Ltd Metro Star Property Plc. Sansiri Plc.

75 35 116 226 76

19

Construction Progress

Number of Units

Launch Date

Sansiri Plc. Sansiri Plc. Pabhada Realty Co., Ltd Chartered Square Co., Ltd Siamphan Enterprise Plc. Metro Star Property Plc. Raimon Land Plc. Golden Land Plc. Goldman Land Co., Ltd Supalai Plc. Plus Property Partners Co., Ltd Sansiri Plc. Kinnaree Property Fund Supreme Team Co., Ltd Land & House Plc. Plus Property Partners Co., Ltd Plus Property Partners Co., Ltd Golden Land Plc. Hotel Properties Ltd. Raimon Land Plc. TCC Capital Land Ltd. Narai Property Co., Ltd Supreme Team Asian Property Plc. Pacific Star Group Preuksa Real Estate Ltd HKR International Ltd V.C.A.L Business Group Co. Ltd

79 144 53 71 208 245 78 148 315 292 77 34 22 14 155 70 79 108 370 176 443 487 22 286 288 291 196 180 Total: 5,459

Sep Nov Dec Jan Jan Jan Feb Feb Mar Apr Jun Jul Sep Sep Oct Feb Jun Feb May Jul Dec Nov Jan May Jul Nov Dec Feb

03 03 03 04 04 04 04 04 04 04 04 04 04 04 04 06 06 05 05 05 05 06 07 07 07 07 07 08

Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction New Launch in Q1 2008

Sansiri Plc. Sansiri Plc. Primrose Tower Co., Ltd Siamphan Enterprise Noble Development Plc. Hemaraj Plc. In Style Estate Co., Ltd TCC Capital Land Ltd. N/A Noble Development Plc. Noble Development Plc. Asian Property Plc. Som Hansar Co., Ltd Ocean Property Co. Ltd Pan Thai Real Estate Co., Ltd Sansiri Plc. Sansiri Plc.

32 68 22 175 39 219 53 219 130 79 108 597 192 48 278 78 26 Total: 2,363

Jan May Jul Sep May Mar Oct Dec Mar Mar Mar Nov Dec Apr Oct Nov Nov

03 03 03 03 04 04 04 04 05 06 06 06 06 07 07 07 07

Completed Completed Completed Completed Completed Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under

182 611 147 224 22 603 344 Office of Property Management, Chulalongkorn University 126 Ananda Development Co.,Ltd 446 Total: 2,705

Feb Jun Mar Apr Sep Dec Mar Dec Mar

05 05 06 06 06 06 07 07 08

Completed Completed Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction New Launch in Q1 2008

Sathorn Chaopraya Arcadia Co., Ltd Land & House Property Fund City Realty Co., Ltd LPN Plc. Supalai Plc. Major Development Plc. Riverside Homes Development Supalai Plc. Fine Home Co., Ltd Raimon Land Plc. Preuksa Real Estate Ltd

445 521 260 1,296 800 490 397 846 186 509 1,268 Total: 7,018

Nov Apr Sep Jul Nov Jul Nov Jun Jan Apr Jul

03 04 04 05 04 04 05 06 07 07 07

Completed Completed Completed Completed Completed Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under

Construction Construction Construction Construction Construction Construction

LPN Development Plc. Eastern Star Plc. Land & House Plc. Eastern Star Plc. Powerplus Property Co., Ltd Plus Property Partners Co., Ltd Prinsiri Co., Ltd Supalai Plc.

53 277 294 211 214 493 187 621 Total: 2,350

Sep Jun Mar Sep Jul Jun Mar Dec

03 04 05 06 05 06 07 07

Completed Completed Completed Completed Planned/Under Planned/Under Planned/Under Planned/Under

Construction Construction Construction Construction

Name of Project

Developer

Siriyenakart Baan Siri Silom Pabhada Silom Royal Saladaeng Urbana Sathorn St. Louis Grand Terrace The Legend Saladaeng Sky Villa Resorta Supalai Oriental Place Sathorn Plus (by the Pond) Lanai Sathorn Narathorn Place Supreme Residence The Bangkok @ Sap Road Sathorn Plus (by the garden) Condo One Plus Sathorn The Infinity The Met The Lofts Yennakart Empire Place Amanta Lumpini Supreme Gardens Life @ Sathorn Sathorn Gardens IVY Sathorn 10 Sukhothai Residences The Bangkok Residences 33 Projects CENTRAL LUMPINI Baan Rajadamri Siriruedee Baan Sarasin Urbana Langsuan Noble 09 The Park Chidlom Colony Lumpini Park Athenee Residence Baan Rajaprasong Ambience Sarasin Ambience Ruamruedee The Address Chitlom Hunsar Rajadamri 02 Hip The Rajdamri Le Privé Preen 17 Projects

Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction

PHAYATHAI/PATHUMWAN Manhattan Chitlom Baan Klang Krung Siam Pathumwan Condo One Siam The Address Siam Pathumwan Oasis Villa Ratchatewi The Complete Ratchaprarop (Ph. 1) Chamchuree Residences IDEO Q Phayathai 9 Projects

Major Development Plc. Asian Property Plc. Plus Property Partners Co., Ltd Asian Property Plc. C Space Development Co., Ltd TCC Capital Land Ltd. Prinsiri Co., Ltd

RIVERSIDE Baan Sathorn Chaopraya River Heaven Riverside Garden Lumpini Place Narathiwat-Chaopraya Supalai Casa Riva Water Mark The Pano @ Rama III Supalai River Place Anantra The River The River (Phase 1) IVY The River 11 Projects RAMA III Lumpini Suite Ratchada – Rama III Star @ Rama III The Bangkok @ Narathiwat Star @ Narathiwat Master Montara Rama III Condo One X Narathiwat The Complete Narathiwat Supalai Premier 8 Projects

Summary of Condominium Projects on page 20

©2008 RAIMON LAND RESEARCH

20

Inner-City Bangkok New Launches New Condominium Units Launched in Inner-City Bangkok 1H 2003

2H 2003

1H 2004

2H 2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

Sukhumvit Silom/Sathorn Central Lumpini Rama III Riverside Phayathai/Pathumwan

611 110 100 0 0 0

1,165 772 197 53 445 0

1,173 1,207 258 0 1,627 0

1,796 374 272 277 444 0

236 478 130 294 0 793

628 176 0 216 1,691 0

1,689 592 784 0 846 371

2,050 487 0 704 0 625

1,111 307 48 187 695 344

1,076 775 382 621 1,268 126

Total

821

2,632

4,265

3,163

1,931

2,711

4,282

3,866

2,692

4,248

Flagging developer confidence rather than weak consumer demand has negatively impacted Bangkok's property market since mid-2006, resulting in a 39% year-on-year drop in new

New Condominium Units Launched in Inner-City Bangkok (2003-2007)

No of Units 4500

condominium launches and the postponement of many projects

4000

in the pipeline. However, strong pre-sale performances by

3500

mid-year boosted confidence, triggering the second-half

3000

introduction of projects with 4,248 units to bring the 2007

2500

launch tally to 6,940 units.

2000 1500

The Sukhumvit area remained the most popular of the Central

1000

Bangkok locations, and accounted for 41% of the 2007

500

launches with 2,187 units, most of which were in the Thonglor

0 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

area: The Alcove on Thonglor 10, Siri@Sukhumvit between Sukhumvit sois 38 and 40, Le Luk in Pra Kanong, the Eight Thonglor redevelopment of the unfinished RS Tower and Siri @ Sukhumvit Breakdown of New Launches by Area in 2007

39 and most recently the introduction on the Royce Private

13%

Residences on soi 33.

The Riverside ranked second in project introductions last year with 1,963 units. The most notable included The River located

41%

next to the Peninsula hotel and across the Chao Phraya from the Shangri-La and The Oriental hotels, and Ivy the River further down Ratchaburana Road. The Sathorn/Silom business district

26%

followed with 1,082 units and includes the Life and Ivy projects on Sathorn 10, Sathorn Gardens' renovation of an existing Sukhumvit

structure, and Sukhothai Residences, currently the most exclusive

Silom / Sathorn

project in Bangkok located directly on Sathorn Road.

7%

11%

2%

Central Lumpini Rama III

Central Lumpini accounted for 430 units with two major project

Riverside

launches from Sansiri on Ruamrudee Road - Preen + Privé -

Phayathai /Pathumwan

along with The Rajdamri on Mahalekluang 3 and O2 Hip on Soi Nalert.

The majority of new developments launched in 2007, totalling

Breakdown of New Launches by Price Range in 2007

3%

3,480 units, fell into the THB2-5 million range, 32% (2,226

15%

units) between THB5-10 million, 15% (1,012 units) between THB10-20 million and just 3% (218 units) averaged over THB 20 million. Developments of note averaging over THB10 million include The River, Sukhothai Residences, Preen + Privé and

50%

Eight Thonglor. This research publication does not cover projects with a majority of the units under THB2 million or those outside Central Bangkok.

32%

2-5 THB million 5-10 THB million 10-20 THB million Over 20 THB million

©2008 RAIMON LAND RESEARCH

21

Inner-City Bangkok Demand Demand for new condominium units in inner-city Bangkok

The average price of an inner-city Bangkok condominium unit

during 2007 was more resilient than the supply side. The total

in 2007 jumped 30% to THB7.8 million from around THB6

market value of the 6,214 units sold last year hit THB43.7

million in December 2006, with average per square metre

billion to top the 2006 tally of THB42.5 billion by 3%. The

(psm) prices rising 5.4% year-on-year to THB88,757 by year

majority of the units sold in 2007 were located in the Sukhumvit

end. Units priced over THB100,000 psm dominated sales,

(1,939 units) and Riverside (1,557 units) areas. Sales in

accounting for 2,050 of the 6,214 units (33%) taken up in

Sathorn/Silom totalled 987 units, and Central Lumpini accounted

2007, while 1,518 (24%) sold for THB81,000-100,000 psm,

for 732 units. Performance at the few projects launched in

1,454 (23%) between THB61,000-80,000 psm and 1,192

2007 was especially high, with 63% of product launched in

(19%) for less than THB60,000 psm. Of note, units in the 10

2007 being sold by December, with several of the high-priced

most exclusive developments sold for an average of THB145,113

projects selling out. Researchers have noted that while the trend

psm, demonstrating that buyers will pay a premium for the most

since 2005 has been in smaller units, sales in the upper-end

desirable projects.

of the market showed clear signs of picking up in 2007, a trend that should continue into 2008.

THB billion

Total Value in THB of Condominiums Sold in Inner-City Bangkok (2003-2007)

30 25 20 15 10 5 0 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

THB/Square Metres

Average Price Per Square Metre of Condominiums Sold in Inner-City Bangkok (2003-2007)

100,000 90,000

88,757

80,000 70,000 60,000 50,000 40,000 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

Š2008 RAIMON LAND RESEARCH

22

Inner-City Bangkok Supply/Demand Cumulative Supply vs Cumulative Demand for Condominiums in Inner-City Bangkok 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

New Supply Demand

821 347

2632 2338

4265 2883

3163 1469

1931 2357

2711 1974

4282 4287

3866 2979

2632 2686

4248 3528

Cumulative Supply Cumulative Demand

821 347

3,453 2,685

7,718 5,568

10,881 7,037

12,812 9,394

15,523 11,368

19,805 15,655

23, 671 18,634

26,363 21,320

30,611 24,848

Cum. Take Up%

42%

78%

72%

65%

73%

73%

79%

79%

81%

81%

From 2003-2007, 30,611 units were launched in Inner-City

begun and 63% in developments still in the planning or piling

Bangkok, of which 24,848 were reported as sold by the end

stages. While more projects are expected to be launched in

of last year. Fewer launches in 2007 coupled with a still-active

the market in 2008, most of the supply will come from large

demand strengthened the take-up rate from 79% at the end of

developers with a solid understanding of customer needs in

2006 to 81% at the close of 2007. Sales have reached 92%

terms of location, design and pricing and those organisations

of the total units available at newly completed developments,

prepared to invest in these factors. This should stabilise take-up

77% in projects where construction on the main structures has

rates at around 80%.

No of Units

Cumulative Supply vs Cumulative Demand for Condomniums in Inner-City Bangkok (2003-2007)

35,000 30,611

30,000 24,848

25,000

20,000

15,000

10,000

5,000

0

Cumulative Supply Cumulative Demand 1H 2003

Take-up%

90%

2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006

1H 2007 2H 2007

Take Up Rate for Condominiums in Inner-City Bangkok (2003-2007) 81%

80% 70% 60% 50% 40% 30% 20% 10% 0% 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

Š2008 RAIMON LAND RESEARCH

23

Inner-City Bangkok Completed Stock Breakdown of Future Condominium Units by Stage of Completion

Completed Finishing/Decoration Main Structure Piling/Foundation Planned/Vacant Land Total

1H 2004

2H 2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

808 1,358 2,038 2,026 2,474

1,839 1,024 2,552 3,408 2,058

3,051 1,508 3,066 4,115 1,082

4,185 1,891 4,115 3,552 1,790

6,095 1,022 6,527 2,153 3,179

7,325 1,082 7,175 6,036 2,053

11,183 1,690 5,980 4,195 2,988

12,425 1,820 9,508 2,671 4,057

7,718

10,881

12,812

15,523

19,805

23,671

26,363

30,611

Of the new developments launched since 2003, 12,425 units

decoration stage (6%), 9,508 at the main structure construction

were completed by the end of 2007 for 44% of the total.

phase (23%), 2,671 at the piling/foundation stages and 4,057

Compared to the 3,140 units completed in 2006, 5,100 units

units at the preparation phase (11%). Based on the current

were finished in 2007 including 1,463 in the Sukhumvit area,

construction progress in off-plan developments, 6,500 to 7,000

2,356 in the Riverside area, 287 in the Silom/Sathorn area

units have the potential to break ground in 2008, while 6,766

and 219 in Central Lumpini. As of December 2007, 18,056 units

units are expected to be completed this year, 5,314 units in

were in different stages of completion; 820 at the finishing/

2009 and 3,134 units in 2010.

Total Units Launched by Stage of Completion

No of Units

35,000

Planned/Vacant Land Piling/Foundation Main Structure

30,000

Finishing/Decoration

4,057

Completed 2,671

25,000 20,000

9,508

15,000

1,820

10,000

12,425

5,000 0 1H 2004

2H 2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

Completed The developer has registered the project with the Treasury Department and the inspection and transfer of units is taking place. The project is considered finished and fit to receive tenants.

Finishing/Decoration Main structures have been completed and contractors are now installing windows and fittings, finalising paint colour schemes and installing lifts.

Main Structure The construction contractor is on-site and the main structures are beginning to rise floor-by-floor.

Piling/Foundation Piling work has commenced and engineers are on-site preparing the groundwork for the commencement of the main structure.

Planned/Vacant Land The developer has secured the plot of land, announced the project and the marketing of the development has commenced. Design plans have been made public and a sales office is operating to receive bookings.

Š2008 RAIMON LAND RESEARCH

24

Inner-City Bangkok Transfers While more units were completed in 2007 than the previous

20% of the transfers. These low transfer rates are due mostly

year, the value of transfers actually dropped from THB10.6

to delays in completion coupled with the fact buyers were

billion in 2006 to THB9.6 billion. Of the 12,425 units completed

waiting for tax cuts. Tax incentives on property transfers put

from 2004-2007, 6,390 have been transferred, but only 1,354

in place in Q1 08 by the newly elected government have reduced

units were transferred in 2007, compared to 1,872 in 2006

the rate from 2.0% to 0.01%, which is expected to boost the

and 1,962 in 2005. In 2007, foreign nationals accounted for

number of pending transfers as well as purchases in 2008.

THB Billion

Total Condomminium Value Transferred in Inner-City Bangkok 2004 - 2007

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0 1H 2004

Foreign Transfers

2H 2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

Percentage of Foreign Transfers in Inner-City Bangkok

30% 25% 20% 15% 10% 5% 0% 1H 2004

Š2008 RAIMON LAND RESEARCH

2H 2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

25

Inner-City Bangkok Outlook and Key Conclusions Key Factors

Prime Condominiums*

Supply

Demand

- Limited availability of new sites

Will

Will

- Restriction on foreign ownership

continue to

continue to

be low

rise

- Strength of Thai baht - Global credit market situation Affordable Condominiums **

- Investment in mass transit system - Rising construction costs - Lower interest rates

Outlook - Rising selling prices - Higher development specifications - Higher buyer expectations - Few market players

Will

Will

continue to

remain

rise

high

- Restoring consumer confidence

- More competitive market - More promotions, incentives - More compact units - New market entrants

- Introduction of escrow accounts * includes developments with high specifications and large-size units located in prime Sukhumvit area (sois 1 - 63), Central Business District (Central Lumpini plus Silom/Sathorn areas) and prime Riverside within five-star hotel neighbourhood ** includes developments with a majority of small units (studios, one bedroom) located within short distance to mass transit BTS sky train/MRT subway lines

New supply in prime condominium developments will

New supply in affordable condominium developments will

continue to be low for the following reasons:

continue to rise for the following reasons:

1. Limited availability of new suitable sites.

2. Limited availability of funds from both local banks and international equity suppliers.

3. Higher buyer expectations have created a stronger barrier to entry for developers.

1. More development site opportunities being offered along planned new mass transit lines.

2. The largest property developers are now focusing in that segment, including LPN, Supalai, Preuksa, Sansiri (through its Plus Property subsidiary) and most recently TCC Capital Land.

Demand in prime condominium developments will continue to rise for the following reasons: 1. Pent up demand since 2006. Latest developments introduced to the market have shown strong pre-sale and price performance.

2. Construction and quality standards have risen signifi-

Demand in affordable condominium developments will remain high for the following reasons: 1. Low interest rates will boost purchasing power and stimulate property investment from local buyers.

2. Positive signs of a consumer confidence recovery started

cantly and Bangkok is now ready to offer similar properties

in Q4 07 and incentive packages initiated by the new

to its regional neighbours at a fraction of the price.

government should support homebuyer's decisions.

The outlook for prime condominiums remains positive but

The outlook for affordable condominiums remains positive but

potential risks remain due to the deterioration of the global

still with potential risks from rising supply, lower development

economy, strengthening of the Thai baht and unfriendly foreign

margins and lower quality offerings. We believe that:

ownership policies. We believe that:

1. Higher competition from new entrants, some with a

1. Selling prices will rise sharply along with higher specifications

strong financial capacity, will push developers to offer

offered by developers and high expectations from buyers.

more incentive and promotion packages to maintain or

We will certainly observe price records in new developments introduced in that range.

gain market share.

2. Development costs are rising faster than homebuyer's

2. Very few developers will focus on the high-end market,

affordability and therefore developers will have to look

as it needs a strong capacity to raise funds, capacity to

to outer-town and more compact units to maintain their

introduce innovative designs and materials along with a well-established brand and local market knowledge.

3. The supply/demand situation is still very balanced and there is very little risk of any oversupply situation in the future.

selling prices.

3. The potential risk of oversupply is rising. The capacity of buyers to transfer units will be a key factor in the following one to three years.

4. The potential risk for lower margins remains high,

4. The potential risk to any amendments to further restrict

especially for new entrants with a low economy of scale.

foreign ownership does not appear to be an issue now,

Site acquisition, construction costs and funding costs

but current regulations still remain in place with no sign

(especially if escrow accounts are being introduced)

of the 49% foreign ownership quota being lifted.

5. There is a potential risk that the Thai baht remains high and may even strengthen. However, that could also play

and marketing expenses (especially promotions and branding) will rise sharply with little room to increase selling prices.

a positive role in attracting US dollar holders to purchase property assets in Asia. Š2008 RAIMON LAND RESEARCH

Section Five Resort Area Condominiums

©2008 RAIMON LAND RESEARCH

27

Resort Areas Executive Summary Uncertainties on foreign ownership have temporarily stalled developers…

A burst of condominium launches in Thailand’s resort areas during the second half of 2007 reversed a slowdown that began in mid-2006 and propelled the year-end tally to 2,415 new units. Developers remain somewhat hamstrung by uncertainty in regards to the intentions of the elected post-coup government and the refusal of banks to offer mortgages on equal terms to foreign investors, which may have slowed new launches.

…but there are signs of a recovery in resort areas close to the Bangkok metropolis

Pattaya, Thailand’s nearest holiday destination located 1.5-hour drive from Bangkok’s international airport, dominated resort area launches with 66% in 2007. Hua Hin, only three hours drive from Bangkok, accounted for 27%, while the more distant Phuket and Koh Samui combined for just 7%.

Pent-up demand released in second half 2007…

Despite a slowdown in the rate of new developments, combined sales value leaped 12% year-on-year to THB17 billion in 2007, totalling 1,789 condominium units sold in Pattaya, Hua Hin, Phuket and Koh Samui.

…but still some resistance is seen on Phuket and Samui islands

Low supply led to fewer sales in Koh Samui (THB0.8 billion worth of product) and Phuket (THB3.2 billion) where sold units averaged THB15.6 million and THB14.8 million respectively.

Pattaya’s projects sold THB6.6 billion worth of units for an average of THB12.3 million. Hua Hin captured THB6.3 billion of the resort market sales but averaged only THB6.4 million per condominium, while handily leading in unit sales at 979.

To date, only a few developments have been completed…

Supply of completed condominium units remained low, totalling 1,814 units at the end of 2007. Only 281 units have been completed in Pattaya since 2003, about 856 units in Hua Hin, 677 units in Phuket and still none in Koh Samui. Another 6,177 units are still under construction, of which 45% have commenced work on the main structures while 32% are in the planning phases. Some 2,000 units in resort areas are expected to be completed in 2008.

…driving up prices and take up rates in off-plan projects

The take-up of newly completed units hit 96%, while those having broken ground reached 61%. Sales remained low at 34% at developments in the planning/piling stages. This is driving up the price of new launches while presenting investors with the potential for strong short-term capital gains.

©2008 RAIMON LAND RESEARCH

28

Condominium Projects Launches 2003-2008 Name of Project

Location

Number of Units

Launch Date

Construction Progress

PATTAYA Northshore Regent Pratamnak Ananya Naklua La Royale Beach Ocean Portofino The Sails Ananya Wongamat Northpoint Ocean Edge Musselana The Chateau Ocean 01 The Lakes@Phoenix Island Lagoon The Cove The Sanctuary The Spinnaker Waterfront The Montrari 18 Projects

Pattaya soi 5 Pratamnak Naklua Jomtien South Jomtien South Jomtien Wongamat Wongamat Naklua Jomtien Jomtien Jomtien Banglamung Jomtien Wongamat Wongamat Jomtien Pattaya Bay Jomtien

187 34 60 149 274 150 93 374 32 43 317 611 118 240 86 172 303 330 18 Total: 3,591

H2 H1 H2 H1 H2 H2 H2 H2 H2 H1 H1 H1 H1 H2 H2 H2 H2 H2 Q1

2004 2005 2005 2005 2005 2005 2006 2006 2006 2007 2007 2006 2007 2007 2007 2007 2007 2007 2008

Completed Completed Completed Completed in Q1/08 Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction New Launch in Q1 2008

Hua Hin Cha Am Hua Hin Cha Am Khao Tao Hua Hin Cha Am Cha Am Cha Am Cha Am Khao Tao Hua Hin Hua Hin Cha Am Hua Hin Hua Hin Hua Hin North Cha Am Cha Am Hua Hin Hua Hin Hua Hin Hua Hin

129 106 68 108 77 79 98 40 78 106 159 106 462 27 93 87 122 175 56 180 158 283 402 Total: 2,514

H1 H1 H1 H1 H1 H1 H2 H2 H2 H1 H2 H2 H1 H2 H1 H1 H1 H2 H2 H2 H2 Q1 Q1

2003 2004 2004 2004 2004 2004 2004 2004 2004 2005 2005 2006 2005 2005 2007 2007 2007 2006 2005 2007 2007 2008 2008

Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed in Q1/08 Completed in Q1/08 Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction Planned/Under Construction New Launch in Q1 2008 New Launch in Q1 2008

HUA HIN Baan Sanploen Baan Ploen Talay Baan Saechuan Hua Hin Blue Lagoon Santi Pura The Sea Side's Baan Ruen Rom Baan Talay Samran The Beach Palace Cha Am Long Beach Las Tortugas Baan Saunrimsai Boat House Hua Hin The Vimanlay Baan Sandao Baan Sanpluem Mykonos Baan Charn Talay Prime Nature Villa Baan Nub Kluen The Breeze Baan Sansuk Marrakesh 21 Projects

Pattaya The Pattaya area, boosted by impressive economic expansion

plc on Jomtien Beach and Raimon Land plc with the Lofts

along the eastern seaboard and its proximity to Bangkok and

Southshore in South Pattaya. Other developers also have plans

the new Suvarnabhumi International Airport, was Thailand's

to introduce new projects aimed at distinct targets including

most active resort location in terms of new condominium launches

Scandinavians and Russians.

in 2007. The year was noteworthy for the introduction of quality developments in both inland projects with sea views and those

Hua Hin

with beachfront locations. Prominent beachfront launches in

Located three hours south-west of Bangkok, Hua Hin has long

2007 include The Spinnaker's 303 units introduced by Apex

been a popular choice for residents of Thailand's capital looking

on Na Jomtien Beach in South Pattaya, and The Sanctuary

to invest in holiday homes within a short drive. Hua Hin began

(172 units) and The Cove (86 units) launched on Wongamat

commanding the attention of property developers in 2003,

Beach in North Pattaya. Premium inland projects introduced

when it was their top choice for new condominium projects,

last year include The Chateau (317 units), Island Lagoon (240

a position it held through 2005. However, it continues as a

units) and The Lakes@Phoenix (118 units). This reflects an

leading option for potential property investors today as seen

emerging trend towards more quality developments at inland

in its 27% share of all projects introduced in resort areas last

locations, and it appears clear that buyers in Pattaya's residential

year. Though Pattaya has been receiving more interest from

real estate market are seeking more affordable properties

residential developers in recent years, Hua Hin remains attractive

regardless of whether or not they have direct beachfront access.

due to its relaxing atmosphere, more affordable prices, appeal

The current rate of new launches will continue with more projects

to Thai buyers and faster development completion schedules. In

in the pipeline from listed developers including Major Development

spite of a lull in new launches in 2006, Hua Hin sprang back

Š2008 RAIMON LAND RESEARCH

29

Name of Project

Location

Number of Units

Launch Date

Construction Progress

PHUKET Maan Tawan Kamala Hills The Breakers The Plantation East Coast Villas Surin Heights Chom Tawan Grove Gardens Kata Gardens Layan Gardens Ocean Breeze Royal Phuket Marina Bangtao Beach Gardens Bel Air Panwa Lotus Gardens Waterside Movenpick Residence The Accenta Phuket Villa Santi Apartments Baan Paradise Patong Harbor View Surin Sabbai The Terrace Gaya Studios Tamarind Hills The Heights, Phuket Alanna Yamu Casuarina Shores Karon View Palm Beach Club Tawan Views The Palms Turtle Cove West Sands (Phase 1) Chava Pearl of Naithorn Serenity Terrace Sky Pavilions Royal Phuket Marina Phase II (Aquaminium) The Crest The Pier Infinity Heights Andara 44 Projects

Bang Tao Beach Kamala area Kata Beach Kamala Beach North East Coast Surin Beach Bang Tao Beach North East Coast Kata Beach Layan area Layan area North East Coast Bang Tao Beach Cape Panwa Layan area Cape Panwa Karon Beach Kata Beach Kalim Beach Karon Beach Patong Beach Surin Beach Kamala Beach Kalim Beach Layan area Kata Beach North East Coast Bang Tao Beach Karon area Bang Tao Beach North East Coast Kamala Beach Mai Khao Beach Mai Khao Beach Surin Beach Naithorn Beach Rawai Beach Kalim Beach North East Coast Patong Rawai Beach Surin Beach Kamala

15 45 48 35 32 5 35 24 33 38 50 79 60 82 26 24 30 16 20 46 29 9 17 11 144 51 18 40 34 42 24 30 100 132 45 73 63 8 15 30 22 81 34 Total: 1,795

H1 H2 H2 H2 H1 H1 H2 H2 H2 H2 H2 H2 H1 H1 H1 H1 H2 H2 H2 H1 H1 H1 H1 H2 H2 H2 H1 H1 H1 H1 H1 H1 H1 H1 H2 H2 H2 H2 H1 H1 H1 H1 H2

2003 2003 2003 2003 2004 2004 2004 2004 2004 2004 2004 2004 2005 2005 2005 2005 2005 2005 2004 2005 2005 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2007 2007 2007 2006 2007

Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Completed Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under Planned/Under

Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction Construction

KOH SAMUI Casavela Peregrina Bay Infinity Samui 3 Projects

Laemset Beach Laemset Beach Bangpo

32 6 65 Total: 103

H2 2006 H2 2006 H1 2007

Completed in Q1/08 Planned/Under Construction Planned/Under Construction

to life last year with the introduction of 640 units from several

significant in the southern island resorts, where over 90% of

prominent Bangkok developers, especially Sansiri plc, which

the demand for condominiums is derived from foreign investors.

launched the 93-unit Baan Sandao, Baan Sanpluem with 87

An analysis of the Phuket/Koh Samui markets reveals that the

units and Baan Nub Kluen with 180 units. Major Development

slow-down in launches in these resort areas was due more to a

is becoming another big Hua Hin player with the 2007

hesitant supply side than from a balking demand side as buyers

introduction of the 122-unit Mykonos. The confidence of Sansiri

snapped up most of the remaining available condominium units.

and Major Development in Hua Hin as a resort location is

Though they only accounted for a combined 7% of the total

carrying over into 2008 as both developers launched new

units launched in Thai resort areas last year, Phuket and Koh Samui

projects in the first quarter of 2008

enjoyed much higher take-up rates. Only 101 units were introduced in Phuket last year, but sales reached 214 units,

Phuket/Koh Samui

and while just 65 units were launched in Koh Samui, 52 units

Unlike the resort destinations located closer to Bangkok that

were sold, which reflects strong demand at both of these locations.

enjoyed spirited condominium launch activity in 2007, the

Should the government's policies on foreign ownership change

islands of Phuket and Koh Samui remained very quiet last year

to allow a higher percentage of foreign ownership, developers

in terms of introducing new developments. The potential impact

will likely introduce more projects to satisfy the international

of amendments in the Foreign Business Act to make residential

demand for resort properties in Phuket and Koh Samui in the

property rights more restrictive for non-Thais is probably more

coming years. Š2008 RAIMON LAND RESEARCH

30

Resort Areas New Launches After a slowdown in the second half of 2006 (1,007 units) and

Phuket (316) exhibiting strong potential. Hua Hin continued to

a lacklustre 1H 07 (912 units), condominium launches at

forge ahead in 2005 with 810 of the year's 2,022-unit launch

Thailand's four major beach resorts moved forward in the second

total, followed by an increasingly popular Pattaya (667), which

half of last year with the introduction of 1,503 units, almost

surged past Phuket (545). The first half of 2006 left Hua Hin

40% more than in any previous six-month period. This raised

without a launch and only 281 units were introduced there in

the annual tally to 2,415 units, a 14% jump over 2006. Pattaya

2H 06. Pattaya drew the most attention that year with 1,110 units

sealed its position as the most-desired location with 1,609 units

launched followed by Phuket with 690 units. New projects

(66%) launched last year, followed by the Hua Hin/Cha Am

introduced in Pattaya last year point to a trend of more quality

area's 640 units (27%), Phuket's 101 units (4%) and Samui's

inland projects, while Hua Hin is witnessing continued interest

65 units (3%). Hua Hin and Phuket welcomed the Kingdom's

from Bangkok developers. Hesitancy in introducing new supply

first resort area condominiums in 2003 with the combined launch

in Phuket and Samui Island is due to strict foreign ownership

of 272 units. Pattaya joined the foray in 2H 2004 with 187 units,

rules which are more sensitive areas to this issue than Hua Hin

while Hua Hin (654 units) began showing dominance with

and Pattaya.

New Condominium Units Launched in Resort Areas (2003-2007)

No of Units

1,600 1,400 1,200 1,000 800 600 400 200 0 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

Breakdown of New Launches by Resort Area in 2007

4%

3%

66% 27%

Pattaya Hua Hin Phuket Koh Samui

Š2008 RAIMON LAND RESEARCH

31

Resort Areas Supply/Demand Since 2003, 7,985 condominium units have been launched in

that for projects in Thailand's resort areas, potential investors -

Thailand's resort areas, of which 4,884 units were reported as

particularly foreigners who are based outside Thailand - expect

sold by the end of 2007. The moderate increase in launches

to see clear evidence of ongoing construction before making

last year coupled with a still-active demand strengthened the

their purchase decisions. This also explains the lower take-up

take-up rate from 56% in December 2006, by which time 3,095

rates in resort properties compared to inner-city Bangkok, but

of the 5,570 units launched were sold, to 61% at the close of

it should be noted that there are very few unsold units in resort

2007. This is the highest cumulative rate since the 72.8%

developments that are nearing or have reached completion.

achieved in 2H 04, when 1,040 units of the 1,429 launched

Today, most projects in Thailand's resort areas are launched by

had been sold. Newly completed developments have sold 96%

large, reputable developers who do not rely on booking rates

of their units compared to 61% in projects that have already

before starting construction. As such, the residential property

started construction of the main structure. However, only 34%

market in the resort areas is steadily maturing with fewer one-off

of the units in developments that are still in the planning and/or

builders, and is instead being driven by more established,

piling stages have been sold. These figures clearly demonstrate

well-capitalised developers.

Take Up Rate for Condominiums in Resort Areas (2003-2007)

Take-up %

100% 90% 80.% 60%

61%

50% 40% 30% 20% 10% 0%

1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

No of Units

9,000

Cumulative Supply vs Cumulative Demand for Condomniums in Resort Areas (2003-2007)

Cumulative Supply Cumulative Demand 7,985

8,000 7,000 6,000

5,570

5,000 4,884

4,000

3,451

3,000 2,000

3,095 1,429 1,944

1,000 1,040

0 1H 2003 2H 2003 1H 2004 2H 2004 1H 2005 2H 2005 1H 2006 2H 2006 1H 2007 2H 2007

Š2008 RAIMON LAND RESEARCH

32

Resort Areas Demand In 2007, Pattaya condominium units achieved the highest average

Demand in Thailand's resort areas represented a total market

price per square metre (psm) among those offered in Thailand's

value of THB17 billion for the 1,789 units sold in 2007, up

resort areas at THB96,332 psm followed closely by Phuket at

12% from the THB15.2 billion posted in 2006, with units

THB95,181 psm. Koh Samui units recorded an impressive average

averaging THB9.5 million. The larger units on Phuket and Koh

price of THB87,420 psm while those in Hua Hin fetched an

Samui averaged THB14.8 million and THB15.6 million respectively,

average of THB72,063 psm. The strongest growth performances

while Pattaya units averaged THB12.3 million. Vibrant demand

were turned in by Pattaya, which climbed 10% from last year's

in less-expensive Hua Hin saw units selling for an average of

average of THB86,974 psm and Hua Hin, which jumped over

THB6.4 million last year, and hungry investors snapped up

14.6% from the average THB62,991 psm achieved in 2006.

almost all the units in projects launched there in 2007 including

In spite of these positive results, the average price for all the

Baan Sanpluem, Baan Sandao, Baan Nub Kluen and The Breeze.

resort areas combined slipped 5.4% from THB87,139 psm at

Pattaya recorded sales of 544 units last year compared to the

the end of 2006 to THB82,655 psm at the close of last year.

1,609 launched, making it the only Thai resort that may be

This is partly due to the rise in importance of the “more affordable”

offering too many choices to investors. It is worth noting that

Hua Hin area for investors in Thailand's resort property market.

development periods are much longer in Pattaya due to the

High-end condominium units priced over THB100,000 psm

amount of time - three to five years - required to finish construction

accounted for 23% of the total sales of all resorts in 2007,

of its high-rise projects. Consequently, more time is allowed for

while those between THB80,000-100,000 psm captured 21%.

the demand to absorb the supply. Conversely, developments in

Units priced in the THB60,000-80,000 psm range commanded

Phuket, Hua Hin and Koh Samui take much less time as regulations

the most interest with 29% of the sales, while those under

stipulate that structures are a maximum of three to seven storeys.

THB60,000 psm made up 23% of the total. Of note, these

In total, 979 units were sold in Hua Hin last year compared to

low-end units were the best sellers in 2004, but now represent

the 640 units launched. Phuket recorded sales of 214 units in

less than a quarter of the marketplace. Also worth mentioning is

2007 versus the 101 launched, and Koh Samui turned over 52 units

that the most exclusive 10 developments sold for an average of

compared to the 65 units introduced. These ratios demonstrate

THB123,715 psm.

a healthy demand in spite of the cautious stance taken by developers in introducing new projects during the period of uncertainity over the country's leadership.

Breakdown of Sold Value

5% 19%

39% Total Value in THB of Condominiums Sold in Resort Areas (2003-2007)

THB billion

37%

Pattaya

12

Hua Hin Phuket

Pattaya Hua Hin Phuket

Koh Samui

10 8

Koh Samui

6 4 2 0 2003

©2008 RAIMON LAND RESEARCH

2004

1H 2005

2H 2005

1H 2006

2H 2006

1H 2007

2H 2007

33

Resort Areas Completed Stock Through the end of 2007, only 23% of the new development stock launched in resort areas since 2003 have been completed for a total of 1,814 units, which includes 281 units in the Pattaya area, 856 units in Hua Hin, 677 units in Phuket and none on Koh Samui. The remaining 6,177 units were still in various Breakdown of Future Condominium Units by Stage of Completion in 2008

phases of completion as of December last year including 3,632 units (45%) still under construction and another 2,545 units (32%) in the planning stages. Pattaya has 1,437 units

23%

under construction and 1,861 units in the planning stages, while

32%

Hua Hin has 1,089 units under construction and 569 units are being planned. Phuket has an impressive tally of 1,003 units under construction, while all of Samui's 103 units are in the construction phase while many more are still at the design stage.

These figures demonstrate that there is still very little supply in completed condominium units in Thailand's resort locations as well as a limited number of completed projects. This situation

45%

has lifted resale prices, allowing developers to increase the prices of units in new project launches while opening the door for investors seeking impressive short-term capital gains. It is forecasted that Completed

about a third of the units purchased off-plan (approximately

Under Construction

2,000 units) will be completed in 2008, most of which will be

Planned/Vacant Land

in the Phuket and Pattaya areas.

No of units

Total Units Launched by Stage of Completion (2003 - 2008) Planned/Vacant Land

4,000

Under Construction Completed

3,500 3,000 2,500 2,000 1,500 1,000 500 0

Pattaya

Hua Hin

Phuket

Koh Samui

Š2008 RAIMON LAND RESEARCH

34

Resort Areas Tourism Pattaya

Hua Hin

Pattaya remained Thailand's most popular resort destination in

Thai tourists continue to dominate Hua Hin's arrival charts as

2007, with tourist arrivals approaching seven million. Since

the annual figure rises above six million due to its proximity to

2001, annual visitor numbers have steadily climbed 10% before

Bangkok, association with the Royal Family and choice of

leaping 9% to 6.68 million in 2007, with Suvarnabhumi

championship golf courses. However, foreign tourists have

International Airport, just over 90 minutes away, receiving much

been descending on Thailand's second most popular resort in

of the credit. Russia, South Korea, China, India and Taiwan

increasing numbers despite its distance from Bangkok's airport,

have replaced the traditional western markets on top of the

though limited flights are now available to Hua Hin. The top

foreign arrivals charts. Of the total, 30% are premium tourists

international markets are Sweden, the UK, Finland, Germany

staying at 4- and 5-star hotels, and to accommodate this demand

and Denmark.

around 1,000 rooms in new luxury properties will come on line in 2008 and 2009.

Koh Samui Phuket

International arrivals to Koh Samui - led by the UK, Germany,

Phuket's tourist arrivals are fully back on their pre-tsunami track,

Australia, Sweden and Switzerland - have stagnated since

as reflected in passenger numbers at the Phuket International

2005 due to limited air access, which has capped passenger

Airport, which jumped over 20% year-on-year in 2007 to 5.69

figures at around 1.4 million per year, though an adequate

million. The leading markets for Phuket - Australia, the UK,

supply of 4- and 5-star accommodation exists. However,

Sweden, South Korea and Germany - received a boost last year

upgraded facilities at the airport and Thai Airways International's

with additional charter flights from Europe on top of the scheduled

commencement of twice-daily Bangkok flights using Boeing

direct flights by some 25 airlines. To meet the increased demand

737s is expected to boost arrivals in 2008, while Bangkok

for accommodation, some 10 international hotel brands will

Airways plans to expand regional services into the island.

be opening resorts, many offering villas, within the coming two to three years.

Total Tourist Arrivals in Resorts Desinations (2001-2007)

2001

2002

2003

2004

2005

2006

2007

Phuket 3,789,6 60 Pattaya 3,857,650 Hua Hin 4,780,432 Koh Samui 837,533

3,990,702 4,184,423 5,004,984 857,335

4,050,077 4,253,474 5,139,196 846,281

4,793,252 5,010,564 5,312,591 937,763

2,510,276 5,338,009 5,666,600 1,014,909

4,499,324 6,114,947 5,958,522 1,030,623

5,005,653 6,680,658 6,351,976 1,059,642

Source: Tourism Authority of Thailand

Top 5 Nationalities of Foreign Visitors (2007)

Rank Rank Rank Rank Rank

1 2 3 4 5

Phuket

Hua Hin

Koh Samui

Pattaya

Australia UK Sweden Korea Germany

Sweden UK Finland Germany Denmark

UK Germany Australia Sweden Switzerland

Russia Korea China India Taiwan

Source: Tourism Authority of Thailand

Total Passenger Arrivals by Airport in Resorts Desinations (2001-2007)

Airport

2000

3,455,355 Phuket Koh Samui 655,809

2001

2002

3,557,319 3,565,454 783,666 742,749

2003

2004

2005

3,545,579 4,779,359

3,123,834 1,294,105

748,174

1,033,468

2006

2007

4,692,446 5,687,094 1,400,259 1,383,710 Source: Department of Civil Aviation

Š2008 RAIMON LAND RESEARCH

35

Resort Areas Global Buyers Sweden 4%

United Kingdom 10%

3%

23%

Denmark

Russia

4% 4%

Germany

United States

3%

3%

Estonia

China 15%

Thailand

9%

Australia

Commentary: This world map illustrates the breakdown of the total value invested in Raimon Land's resort area developments from

around the world by region during 2007. For example, 23% of the total value of funds purchasing Raimon Land's projects in these areas came from Russia.

Foreign buyers accounted for the bulk of condominium purchases in Thailand's resort areas in 2007, though the most active Buyers Of Raimon Land's Condominium Projects in Resort Areas in 2007 Country

Russia Thailand United Kingdom Australia Germany United States Sweden Denmark China Estonia

THB Total Spend

Market Share

334,035,902 222,456,182 146,678,900 126,019,150 64,713,223 59,188,464 57,897,261 45,133,800 44,361,378 40,204,148

23% 15% 10% 9% 4% 4% 4% 3% 3% 3%

markets have changed.

The profile of Raimon Land's buyers show Russians catapulting from outside the Top 10 to lead resort condominium purchases with 23%, ahead of the Thais (15%), British (10%) and Australians (9%). Of note, Germany (4%) and China (3%) followed Russia from the lower tiers on the buyer's chart to break into the Top 10 last year. In contrast, the US (4%) and Sweden (4%) fell from the Top 5. The Russians and British lead Pattaya's property investors with balanced interest from Thais.

On the other hand, Hua Hin remains a predominantly Thai destination with emerging international interest now making up 20-30% of demand. Foreigners dominate condominium purchases in Phuket and Koh Samui, where Thais represent less than 10% of transactions.

Residential purchases in Thailand's resort areas depend heavily on tourism, and a review of the 2007 arrival statistics to these destinations accurately reflects who among the visiting nationalities is buying and who will continue making property purchases into 2008.

Š2008 RAIMON LAND RESEARCH

36

Market Perceptions Resort Areas - Roundtable

Untapped Potential In Resort Areas

Pattaya Bay by night: the city is one of Thailand's leading resort areas for quality condominiums and continues to grow

The inaugural Raimon Land Condominium Focus

Land's Condominium Focus Thailand Roundtable, the industry

Thailand Roundtable was held recently at the Four

is being held back by as much as four times its potential growth

Seasons Bangkok. Attending were key industry

as a result of two key factors.

stakeholders to discuss future real estate trends in Thailand's resort destinations and the measures

Firstly, the restrictive foreign ownership laws which limited

required to enable the industry to flourish and reach

overseas freehold to 49% of a given development. And secondly,

its full potential.

an inability of foreigners to secure financing, limiting the market almost exclusively to cash buyers.

Thailand's resort destination real estate market remains extremely buoyant despite a number of challenges it faced last year while

“Over the last three years Thailand's resort areas have

continuing to hold enormous potential for accelerated growth.

progressed rapidly”, said Raimon Land Chief Executive Officer,

While political instability dented international buyer perceptions

Nigel Cornick in his opening remarks.

and some held back from investing, a remarkable resilience remains in the sector, particularly from regional buyers who

“It is quite clear that Thailand is a destination where people

recognise the long-term value and lifestyle appeal of Thailand.

want to come, in terms of affordability, lifestyle and cost of living. There's not really a negative apart from one - which

A gradual maturing of the market, which has seen the emergence

is related to the foreign ownership issue.

of developers with established track records, has led to higher international standards which has led to - on the whole - a greater

“And I still don't think, perhaps, we are all doing enough to

confidence among buyers.

influence the government to wake up and understand it, because if they don't, I think we are going to lose opportunities as time

This has further fuelled demand for luxury condominiums and

goes by to neighbouring countries.”

villas, as more finished product is available for purchase, decreasing the scepticism associated with buying off-plan that

Of the destinations hardest hit by the regulations outlined in

had plagued some resort developments in the past. However,

the Foreign Business Act (FBA), Phuket and Koh Samui standout

according to views garnered from senior industry representatives

as they rely on overseas investors, as the attraction of these

from Thailand's resort areas speaking at the inaugural Raimon

destinations to Thai buyers is limited.

©2008 RAIMON LAND RESEARCH

37

Thai nationals typically prefer to buy in Hua Hin and Pattaya, although there are clear indications that this is slowly changing in destinations where strong capital gains or rental yields can be found.

Overseas investors on the other hand, are driven more by lifestyle imperatives, seeking a pleasant retirement location or a second home, with the investment opportunities coming as a secondary concern.

Koh Samui Needs Proven Developers Savills' Robert Collins (left) and Indigo Real Estate's Daojai Tanommuang

Samui Villas & Homes Managing Director John Birt said he felt that the real impact of the FBA was it had scared some long-haul individual buyers away last year, although there were signs of more interest again in the first quarter of this year.

less important in the decision making process of buying a property,” said Savills Managing Director Agency & Investment

“Those who were familiar with Thailand who live in Hong Kong

Services, Robert Collins.

and come three times a year on holiday, are still buyers,” he said. “But the first timer out of Europe is far more circumspect

“The real issue is the lack of financing for a long-lease property.

about the decision making processes.”

We are looking at a very small pool of cash buyers and that pool is inevitably shrinking with what is going on around the

He added that an additional hindrance of growth in Koh Samui

world financial markets.

was a lack of developers with a proven development track record, which would provide the confidence among investors

“And combine this with the relatively limiting ownership

required to increase sales.

structures that we have restricting freehold condominium ownership and necessitating long leases for landed property,

“Until such time as Raimon Land and the likes of Raimon Land

and these factors dilute the market down even further to a

come, most of the developers are in all honesty amateurs. They

smaller buying demographic.”

are a bunch of individuals who have come into some money and no one knows who they are. The days of selling off plan

Demand For Thailand Remains High

unless you have a recognised brand name are behind us,” said Mr Birt.

Mr Collins added that there remained strong demand despite these issues, alluding to the massive potential that existed in

In Phuket, the political instability of last year impacted growth

the market for further growth.

in the low and mid range, with slow sales among developments that were not finished, according to Indigo Real Estate's Senior

“What we have seen over the last two years is that there are

Sales Associate, Daojai Tanommuang.

actually a huge number of sales taking place,” he said.

“People are a bit scared. They want to see some finished

Colliers International Associate, International Properties, Gareth

product,” said Ms Daojai, adding the market really started to

Lee Hart, echoed Mr Collins' views saying that interest in

come back for luxury developments towards the end of last

Thailand was high.

year, demonstrating that demand was still very much there.

“Thailand has always been a personal favourite of ours due to Residents of Asia seem far less concerned about political

its lifestyle options and the good quality product in the market,”

instability, particularly expatriates based in Hong Kong,

he said.

Singapore and Shanghai, who view investing in real estate in Thailand's resort destinations as a chance to buy a second

He added developer track record, finance and the ownership

home in a terrific location rather than be concerned with

quota remained key issues, while politics was increasingly

political issues.

unimportant.

“The seasoned expat that lives in the region that is looking for

“We place high emphasis on developer track record. We are

a holiday home here sees the government as being increasingly

very careful when selecting developments for sale into the ©2008 RAIMON LAND RESEARCH

38

Market Perceptions Resort Areas - Roundtable international market. We have increased our level of due diligence, as we have experienced the emergence of many developers which are unprofessional in their approach to the international property market. We are very image conscious of our Colliers International logo when branding developments for sale, as buyers see Colliers as someone they can trust.”

Mr Hart added: “Banking is the single most important aspect for the lower end of the market, but the loans on offer to investors are often unattractive and hard to secure even with the condominium freehold. If you go to the bank they offer mortgage plans, however the buyers are often unhappy with Starwood Asia Pacific Hotels & Resorts' Wayne Buckingham

the terms and interest rates are high.

“On the political side, it has affected buyers in terms of their

Thailand's tourism industry is still delivering these people in

mindset. However, we have consistently completed transactions

increasing numbers into resort destinations and continuing to

through the year mainly with high-end buyers looking to purchase

support the surge in property development.

with values ranging from USD500,000 going up to USD3 million. The high-end buyers are little affected, as most are cash

Phuket's performance in 2007 is a case in point. Despite the

buyers when purchasing in Thailand.”

political turmoil, it continued to deliver high load factors to airlines and strong occupancies to hotels.

Regarding ownership, Mr Hart commented that it was something that was holding up the entire market as developers were

“In Phuket during the high season you could not get rooms there,”

unable to move onto new projects and keep up with the high

said Starwood Asia Pacific Hotels & Resorts Regional Vice-

demand as they needed to off-load the Thai portion, which in

President, Thailand, Vietnam, Cambodia, Wayne Buckingham.

the case of resort areas was troublesome as many local buyers “The rates were very high and there were very strict conditions

had no interest in these locations.”

for buyers, but people still bought. Phuket really boomed last

The Role Of Tourism

year and this year we are expecting things to be much better.

Many would credit the travel and hospitality industry with

“Even in the first quarter most hotels are going well. Some of

laying the foundations for Thailand's development as a hot

the areas that have struggled for some time, like Khao Lak,

spot for luxury villas and condominium developments. Tourists

are particularly strong now. Our Le Méridien property there is

come to Thailand, love the country and all it has to offer and

running at around 85% in terms of occupancy which is very

look to buy a second home for future visits or as an investment,

unusual. Krabi is also doing much better than ever before and

or a location to which they can happily retire.

Phuket is running mid 90% range for occupancy in the first quarter of 2008,” Mr Buckingham said.

The stage is set for Thailand's property industry to continue to benefit from the international perception created by the tourism industry, but if key issues are not solved, there is a risk it will never reach its full potential.

Moreover, it could lose business to neighbouring countries such as Vietnam and Malaysia, who have adjusted regulations to entice overseas buyers away from Thailand. But industry leaders remain unfased.

“I think the reality in Vietnam is that they wont be taking any property investment business away from Thailand for a

Samui Villas & Homes' John Birt

©2008 RAIMON LAND RESEARCH

significant number of years,” said Raimon Land's Mr Cornick.

39

Delegates Attending The Ramon Land Condominium Focus Thailand Roundtable Delegate

Wayne Buckingham John Birt Daojai Tanommuang Robert Collins Gareth Lee Hart Nigel Cornick Henri Young Jonathan Atkins Janjira Panitpon

Company

Starwood Asia Pacific Hotels & Resorts Samui Villas & Homes Indigo Real Estate Savills Colliers International Raimon Land Raimon Land Raimon Land Raimon Land

Position

Regional Vice-President - Thailand, Vietnam and Cambodia Managing Director Senior Sales Associate Managing Director, Agency & Investment Services Associate, International Properties Chief Executive Officer Director of Marketing Vice-President Sales - Pattaya Director of Corporate Planning

“It is still not a 'world' destination. Everyone knows where

go back and look at the psyche of the Asian people, why they

Phuket is, but I'm not sure every one knows where Na Trang

travel and what they're interested in. Rather than trying to

is. It will for sure in the future become a competitor though."

convince them into doing something that they're not that intent on doing. We have sold maybe two units to Thais in Phuket.

Foreign Quota Limits Growth

They don't want to go to Phuket and sit on the beach.

Mr Cornick added: “The main point here is that these countries

“In Pattaya we are seeing an increase in Thai buyers, especially

are prepared to change their rules and regulations to attract

if they see investment potential. This is another way to encourage

foreigners. They want foreigners to come and buy their real estate.

Thais to buy if they can see the yields they may achieve. Hua Hin is a different kettle of fish altogether due to the Royal association.”

“But in Thailand it is the reverse. So I think it is more a question of not about how much we are losing but how much we could

Mr Collins agreed saying that the former high percentage of

be gaining if two changes could be made. Firstly, long leasehold

Thai buyers against overseas buyers was changing in Hua Hin

from a villa perspective. And secondly, increasing the foreign

and where selling off-plan was a thriving business.

quota allocation which most upmarket developers find restrictive.

“We are finding the split used to be 70% Thais, 30% foreigners.

"So it is frustrating as I think the opportunity is huge. If we had

Now it is 60% Thais, 40% foreigners, with Brits and Scandina-

the ability to finance or guarantee foreign ownership the market

vians very active,” he said.

would quadruple easily. Without a doubt.

“The major condominium developments to date have either been “We sold about THB4 billion in resort real estate last year. We

developed by big Thai listed companies or large Thai family

could have four times more if there were no restrictions. So there

company groups that provide that sense of familiarity and

is a solid upside in moving this forward.”

comfort that the Thais are happy to put their money down on.

So selling off-plan in Hua Hin and Cha-Am is a vibrant business.”

The issue is no clearer than in Pattaya.

Establishment Of "Greater Phuket" Zone “The developments in Pattaya are selling out of foreign quota before they have even broken ground,” said Raimon Land Vice

Pattaya, Phuket, Koh Samui and Hua Hin are very established

President Sales - Pattaya, Jonathan Atkins.

resort destinations. Khao Lak less so and arguably it is in this direction that property development is moving to establish a

“At Northpoint we sold out of foreign quota by the beginning

"Greater Phuket" area on the mainland adjacent to the island

of April. The problem is, is that the Thais don't usually buy until

that is easily served by Phuket's airport.

the building is halfway complete as they are still scared of what happened during the Asian crisis back in 1997."

However, where are the locations of the future?

Raimon Land Director of Corporate Planning, Janjira Panitpon

“If you talk to the European travel agents, there is a lot of

agreed that there was a reluctance on the part of Thais but that

interest in some of the more out of the way places - like these

they would learn to trust developers more, especially now that

little islands that are seen as magical,” said Mr Buckingham.

they are seeing the significant capital gains delivered by developers with track records to investors buying off plan.

“I think that the secret we have learned is that the backpacker destinations of the past are now the places of the future. Where

But in some destinations, it is simply not worth the effort,

the backpackers are going now will be in ten years time where

according to Raimon Land Marketing Director, Henri Young.

big hotels will be.”

“It is not worth us pursing Thais to buy in Phuket,” he said.

Luxury villas and condominiums will surely not be too far

“I can spend our marketing budget more wisely. You need to

behind them.

©2008 RAIMON LAND RESEARCH

40

Market Perceptions Resort Areas - Roundtable

Branded Real Estate Emerges In Thailand Branded residences have found their way into Thailand and are touted as a strong buy for investors

“We have not done a lot of it in this part of the world, but

due to the high levels of confidence they inspire and

everyone seems to want it because the owner believes he will

the superior returns they can provide.

get some quick returns.”

Branded residences are a fairly recent addition to Thailand's

Mr Buckingham said the biggest test case for Starwood was the

resort real estate portfolio, but they are quickly attracting the

St. Regis property in Singapore. In this market, luxur y

attention of overseas investors.

condominiums typically sold for SGD2,500 per square metre (psm) at the time the project was launched. The St. Regis

Essentially world-renowned luxury brands are working with

Residences went for an average of SGD4,000 psm.

owners and developers to manage different components of residential projects to encourage investment.

“No one had ever seen anything like this before and they sold very fast. People were paying a real premium for the name and

The key attractions of this to buyers lie in security, trust, recogni-

to have the brand attachment. It really set the market alight,”

tion and an opportunity to not only benefit from managed rental

Mr Buckingham said.

and global hospitality chain distribution systems, but to earn some solid capital returns.

A St. Regis is planned for Bangkok, which will contain a hotel, residences and serviced apartments. The hotel is managed by

Branded residences are not new to the world's property market,

Starwood. The serviced apartments will be sold off and become

with Starwood Hotels & Resorts having a fully dedicated division

part of the letting pool for Starwood to manage. The residences

in North America to handle a product line that has been

are also sold off, but not put up for let.

successful in their domestic market for over 25 years.

Mr Buckingham said that hospitality brands needed to be “Residential property is something Starwood has been very

cautious about choosing the right developer when entering into

good at in North America and made a lot of money out of it,”

such an arrangement or run the risk of damaging themselves

said Starwood Asia Pacific Hotels & Resorts Regional Vice-

when the property no longer met the standards associated with

President, Thailand, Vietnam, Cambodia, Wayne Buckingham.

the brand.

From left: Robert Collins, Daojai Tanommuang and John Birt

©2008 RAIMON LAND RESEARCH

41

“We have to ensure that the developer will deliver a residential product that is in line with the hotel. You can't have a St. Regis Residence not looking as good as the hotel,” he said.

“So we have to be very careful that we chose the right developer.

Colliers International's Gareth Lee Hart

This is critical for us as they are using our name and the developer can sell off and is never seen again, but we have to

Mr Buckingham agreed, adding demand for luxury real estate

deal with the people who have bought the residences and their

was being driven by people who wanted the status and lifestyle

expectations."

attached with a brand.

Trust In Brand Names

“People are buying the lifestyle. They want the lifestyle attached to the name. They feel it gives them status to be attached to a

Mr Buckingham added: “They expect services from us, concierge,

brand that people love and want and recognise,” he said.

valet, doorman, laundry, spa, private access and they want to be able to charge to their residence if they eat in the restaurant.

“With W Residences, we are not going to market to the age

There are many different things that they want. But what we're

demographic, it is about a lifestyle choice and we're going to

finding is that this concept only works for the high-end luxury

tell them what this lifestyle choice is, and get them to understand

brand.”

and immerse them in the brand and they have to then decide if this is for them or not.”

Starwood currently has 12 branded residence projects in Asia with two in Thailand, the upcoming St. Regis in Bangkok and

Long-Term Capital Gains

the W in Koh Samui. It manages these in one of two ways.

International property agents such as Colliers, view the developOne, it sells the residences and the owner owns it and it has

ment of branded residences in Thailand as highly positive.

nothing to do with the hotel. Or two, it is part of the hotel inventory and in the hotel letting pool.

“When we present a product to clients we are expected to give a solid reason as to why our clients should buy the development

Mr Buckingham added that one issue regarding letting was

we are marketing internationally," said Colliers International

that owners complained about one villa getting a much better

Associate, International Properties, Gareth Lee Hart.

occupancy rate than another, which has led to the group insisting on pooling all revenue from the villas and splitting it across the

"If the developer and hotel brand have a good reputation and

villa owners according to size.

a strong track record and offer sensible or unique designs, confidence of the investors is much higher.

Raimon Land Chief Executive Officer, Nigel Cornick said that branded residences were attracting demand due to the integrity

“There is a key benefit for buyers of international property to

associated to the brands involved and the corresponding

consider branded residences as the operators can provide

confidence this gives investors buying off-plan.

security, confidence and peace of mind for the owners, especially when the investment is in excess of USD1 million. A lot of

“There will not be a W Residence that does not get built. There

buyers realise the return is not necessarily in the short term

is a loyal following of buyers. There is so much wealth in the

yield for this asset class of property, but in the longer term

world today and there is so much demand to spend your money

capital appreciation.”

on things that there is no shortage of buyers,” he said.

Indigo Real Estate's Senior Sales Associate, Daojai Tanommuang “There is a huge volume of buyers. They don't really care if it

added that in Phuket branded resort properties were in high

is three or four million dollars. But they do care if it is a W or

demand, such as in the case of Jumeriah.

a Four Seasons and that is what they want.”

©2008 RAIMON LAND RESEARCH

42

G lo b ec al on ma om rk y et G ro in wth te in rn at io na St lt re ou n ris g Th th m ai o ba f ht Re co po ver lit y ica in ls ta bi Re lit str y fo icti re on ig s n o ow n ne Ri sin rs hi co g c p sts on str uc tio n

Resort Areas Outlook and Key Conclusions

Pattaya

Low

Mid

Mid

Mid

Mid

High

- More market players - Limited completed stock driving prices up - New groups of buyers

Hua Hin

Low

Low

Low

High

Low

Mid

- Strong local demand - Increase prices in both resale and off-plan projects - Low impact from external factors

Phuket

Mid

High

High

Low

High

Mid

- High exposure to external factors - New supply to push demand - Opening of new areas on mainland adjacent to Phuket

Koh Samui

Mid

High

High

Low

High

Mid

- High exposure to external factors - Still a niche market - Branded real estate

Impact of Key Factors in Resort Areas The potential fall in the performance of the global economy

Impact on Hua Hin is limited but still reduces its potential.

would have a limited impact on the number of buyers in Thailand's resort areas because the nationality of buyers is

Rising oil prices are having a direct impact on construction

wide enough not to depend on a single group of customers.

prices and air fares. Potentially, the strongest impact would be

If some investors have reduced in number, such as the US,

in Pattaya as construction regulations permit high-rise structures,

the emergence of other customers from Russia, South Korea

unlike other resort areas where most buildings range from

and China are likely to balance any potential effect.

three to seven stories.

International tourism in Thailand is growing and that has a

The outlook for Pattaya condominiums remains positive driven

positive effect on all resort destinations, especially in Phuket

by strong growth in tourism and the eastern seaboard economy.

and Koh Samui where the majority of the demand is from

Some concerns remain for rising supply along with low Thai

abroad unlike Hua Hin and to a lesser extent, Pattaya.

demand and a rising exposure to a single buyer Russian segment.

The strength of the Thai baht against the US dollar is a durable

The outlook for Hua Hin condominiums is bright driven by local

factor that impacts the Phuket and Koh Samui markets the most

demand, strong enough to absorb rising supply and potential

where prices are often quoted in USD. Hua Hin is driven by

competition from the re-sales of newly-completed developments.

Thai demand, while Pattaya is driven by Bangkok and Russian demand.

The outlook for Phuket condominiums is better than last year due to potential amendments to the Foreign Business Act being

Political stability is key to push up local demand and would

cancelled. More supply should stimulate demand this year,

have the most impact on Pattaya and Hua Hin areas. The impact

hopefully with a more stabilised Thai baht.

of Thai politics and the economy in the Phuket and Koh Samui markets is limited.

The outlook for Samui condominiums will be that it remains a niche market. Brand-name hotels are either opening or

The restriction on foreign ownership has a very high impact on

planning to open, including Conrad, W and Four Seasons.

the Koh Samui and Phuket markets as more than 90% of demand

Most of them will offer residences for sale, pulling in high-end

comes from the international market. It also impacts Pattaya

prospects on the island as confidence that the developments

where foreign demand represents more than half of buyers.

will be well-built and well-maintained will be appealing.

Š2008 RAIMON LAND RESEARCH

For more information please contact research@raimonland.com or visit www.raimonland.com 22nd Floor, Unit 2201-2203, The Millennia Tower, 62 Langsuan Rd., Lumpini, Pathumwan, Bangkok 10330 Tel: +66 (0) 2651 9600 Fax: +66 (0) 2651 9614