Thailand
Thailand: The challenge of high land prices
Sky-high selling prices for land plots in the most sought-after areas of Bangkok always make headlines. When the time comes to develop that land, many people wonder how the purchaser can make a profit.
When a plot of land sells for more than 1 million baht per square wah, most developers will seek to build a high-rise condominium to recover their costs. This can be highly profitable if the condo units are all sold out and the purchasers take transfer. However, there have been cases of plots changing hands for 2 million baht per square wah or more where condos were not built.
The Bangkok inner-city area is where land prices are highest, though we are now seeing some very pricey plots in areas outside the central business district if they are located near mass-transit lines. The most expensive land at the moment is found in Lang Suan, Chidlom and Phloenchit, and the areas along Sukhumvit, Phahon Yothin and Ratchadaphisek roads.
In the area around the Phloenchit intersection, plots have been sold at 1.5 million baht per square wah or more and developed as luxury condominiums over the past decade. In the early days, some people predicted that the prices developers would have to ask for their units would scare off most buyers. But such fears have proved unfounded in most cases; each year seems to bring a fresh per-square-metre price record and buyers willing to pay.
A case in point is SC Asset Corporation Plc, which paid 1.9 million baht per square wah, then a record, for a site on Chidlom Road in 2015. It is now building the luxury condo 28 Chidlom with units priced from 350,000 baht per square metre.
Taking a different approach is the construction company Thai Obayashi Group, which bought land close to Nana BTS station for 2.6 million baht per square wah in 2017. It is planning an office building on the site. While a successful condo might bring more profit, Thai Obayashi is more interested in having an asset that can generate recurring income.
Near the Thong Lor BTS station, meanwhile, MQDC and One.Six Development Corp put their names on the title deed after spending 2.8 million baht per square wah in 2018. They plan a condominium worth 4.8 billion baht on the site. Other transactions along Thong Lor Road have been valued at 1.5 million baht or more per square wah, with more condos in the pipeline.
Not to be outdone, SC Asset last year paid a record 3.1 million baht per square wah for two rai on Lang Suan Road. It plans a condo there with starting prices of 457,000 baht per square metre.
So far this year, there have been a handful of interesting transactions, including one by Shangri-La Hotel Plc. It has paid 2.86 million baht per square wah for 658 square wah on Thong Lor Road and is looking to develop a luxury hotel on the plot.
More plots are expected to come on the market as owners adjust their strategy in light of the new land and building tax. But we might not see any more record-setting prices for a while as the economy and the property market overall have been slowing down.
In the meantime, investors mindful of past land price movements are likely to focus on existing condos with potential for price appreciation in the CBD and established locations such as Lang Suan, Chidlom, Wireless, Sukhumvit and Thong Lor.
Surachet Kongcheep is managing director of Phoenix Property Development and Consultancy Co Ltd.
Source: https://www.bangkokpost.com/business/1735275/the-challenge-of-high-land-prices