Interview: Naporn Sunthornchitcharoen
How do you assess the current disparity between the high-, medium- and low-end residential markets in terms of demand and pricing?
NAPORN SUNTHORNCHITCHAROEN: Over the past two or three years, due to the nation’s overall economic situation, the Thai public’s income has been impacted and the effects of this are evident especially in the medium-to-low end side of the market. Banks are very cautious in terms of mortgages, and this is a large problem which has had consequences on both supply and demand in the mass market segment. As a result, many developers have shifted their focus to the high-end market, which continues to experience stable, sizeable growth.
The price of high-end and luxury condominiums, in particular, has risen very quickly in a short period. This is contingent not only on demand, but also on land availability, as land in the central business districts is in very short supply. High-end residential developments in these areas are experiencing price jumps to BT400, 000-500,000 ($11,300-14,100) per sq metre as a result. I do not necessarily see this as being a risky bubble, however, due to the fact that this market segment is dealing with both very low levels of supply and low levels of demand, rather than the crises experienced in the past or those experienced in other parts of the world.
To what extent are Thai developers diversifying their assets and holdings overseas, and which markets are particularly attractive?
NAPORN: Especially during periods of property price fluctuation, it is important for developers to diversify their holdings. A prudent mix of assets in the property market, in recurring income from the hospitality and retail segments, and in domestic and overseas investments shields developers from such volatility and creates long-term growth. While the top line for many developers tends to be dominated by property development, for a well-diversified developer investments can bring in more when it comes to the bottom line. In doing so, and achieving that balance, the well-being of shareholders, customers, staff and suppliers is ensured.
Both emerging markets and developed markets hold potential in my opinion. While a key concern when looking at property investments overseas is to have clear laws and regulations, as is more so the case in developed markets, other factors can influence your decision as well. Some developed markets are experiencing price volatility or sharp, sustained price spikes, while some emerging markets are attractive at any given time due to currency conditions and other factors. The most important thing is to have a diversified portfolio, and we are seeing more and more Thai developers strive for this in order to both mitigate domestic risk and build a solid foundation for long-term growth.
What impact do you think the current blueprint for mass transit expansion will have on real estate development across Bangkok?
NAPORN: The current expansion works being carried out on the mass transit system are contributing to the volatility of land prices in Bangkok, especially along mass transit routes and their eventual destinations in the central business district. I believe that a zoning policy for land would be wise. At present, nearly all offices in the city are located in the neighbourhoods of Sukhumvit, Silom and Sathorn, creating a transportation network designed solely to transport people from the suburbs to the central business district during peak hours in the morning and evening. This not only creates congestion, but also limits the use of these large-scale transport infrastructure projects to a few hours a day. Self-contained neighbourhoods with a good mix of residential developments, office space and retail space would create that level of efficiency and generate more income for the government and mass transit operators as well. Thus, I believe that zoning plans as we see in other major cities, such as Tokyo, would bode well for both the economy and the liveability of the city.
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