China Leads the Real Estate Investment Charge
As the start date for the ASEAN Economic Community (AEC) draws ever closer serious investors the world’s most populous nation and second-largest economy, China, have been taking ever-increasing interest in the region, and especially in Thailand.
While Chinese entrepreneurs have been engaged in business ventures of various kinds, the heavy monetary investments have very much centred around the real estate sector.
For the past two years Thailand has watched as the Chinese have become one of the major foreign property investors in the country, with leading property consultancy firms agreeing that a lot of this is because they see the huge potential in the AEC, even if it is going to initially be more an economic community on paper than in practical reality for the first few years of its existence.
Colliers International Thailand recently released a press statement claiming Chinese investors were the largest single group to pour money into Thailand in 2014. They were followed by investors from Japan, Hong Kong (which, while formally a part of China, has an autonomous status) and Singapore.
Colliers noted that many Chinese preferred to join with a Thailand-based company or group and engage in a joint venture. Part of the reason why Thailand and other Southeast Asian economies are attracting this added interest is to do with the Chinese central government and its controls on investment within China. These controls have been put in place to control the rapid expansion of the Chinese economy.
This, in turn, has proved a boon for countries like Thailand, and especially Bangkok, which is viewed as a potentially lucrative investment destination.
Colliers claims that it is seeing one or two new Chinese clients almost weekly, up from the average of one or two a month just a few years ago.
One of the reasons for Bangkok being so popular as an investment vehicle for the Chinese is, apart from it being the capital and central business hub for Thailand, its continually expanding mass transit facilities. As the Skytrain and MRT routes are expanded, land prices along those new routes have increased at a large pace. Even so, for the Chinese, the land values are still very competitive when compared with what’s available in Hong Kong and Singapore. Yet most analysts see Bangkok’s growth potential as similar to those aforementioned centres, so the potential profits are greater in Bangkok.
Among projects developed with Chinese capital are the TC Green Rama 9 Condominium, which cost around four billion baht and was developed by Tiancheng International, and Miracle Condominium in Hua Hin, a Beijing Construction Engineering Group project that ran to 5.6 billion baht.
According to CB Richard Ellis, many of their Chinese clients have invested in luxurious apartments in Thailand for use as second homes or as long-term investments.
According to a spokesperson for CB Richard Ellis, the Chinese always “choose to invest in a premium property unit, in a prime location. They consider the investment here as something that will give better returns than the ones in neighbouring countries.”
Another major property consultant, Jones Lang LaSalle claims the Chinese business sector sees Thailand as being the AEC’s regional economic and logistic hub. “Financial institutes from China are looking for offices to expand their branches here. Therefore, the market for rental offices will expand considerably as long as the country’s political situation is stable,” said the managing director of Jones Lang LaSalle.
As well as Bangkok, Hua Hin, Phuket and Pattaya have also attracted Chinese investment interest.
Recently, China’s major real estate developer Junfa Real Estate Company Limited announced the formation of a joint venture company with Thailand’s listed property developer Charn Issara Development Plc. The company has been named
Issara Junfa Company Limited and they have announced they will be developing a real estate project in the south of Thailand.
Issara Junfa has a registered capital of 420 million baht divided into 4.2 million shares with a par value of 100 baht apiece. Charn Issara holds 70 percent of the shares, Junfa Real Estate accounts has 25 percent, and the YMC Holding Company has the remaining five percent.
Charn Issara stated its board of directors would sell 42 rai of land in Phang-nga province to Issara Junfa for 420 million baht. This land would be used to develop a project called the Baba Beach Club, at a cost of three billion baht.
For Charn Issara the joint venture is seen as a way of attracting more Chinese customers as well as giving it greater competitiveness in the property industry.
The Baba Beach Club project will be one of the premium real estate developments in Phang-Nga. It will comprise six single houses priced at 120 million baht each, 40 villas with individual pools to be sold at 16 million baht apiece, 100 apartments in a low-rise condominium, and a hotel.
Charrn Issara notes that the funds for developing the Baba Beach project will come from the company’s working capital as well as financial institutions. The project will commence in either August or September this year.
In the meantime, Charn Issara is planning to turn phase two of its Phuket-based upscale resort property Sri Panwa into a one billion baht real estate investment trust (REIT) after the project is completed by the end of September this year.
The proceeds from the REIT will be used to invest in developing other property projects, including two condominium developments in Cha-Am and Bangkok (both with a combined value of 2.4 billion baht).
Charn Issara management says they expect revenue to grow by five to 10 percent this year, up from the 1.7 billion baht the company earned in 2014. Last year the company realized two billion baht in sales and this year it expects to increase this by 10 to 15 percent.
 http://www.colliers.co.th/ , accessed 21/7/15
 http://www.cbre.com/ , accessed 21/7/15
 http://www.jll.com/ accessed 21/7/15
 http://www.dealstreetasia.com/stories/ci-junfa-jv-develop-property-thailand accessed 21/7/15