Infrastructure plans aimed at greatly improving investment
On 27 March this year the military-installed cabinet approved a 1.91 trillion baht eight-year infrastructure development plan. The three key planks to this plan involve metre-gauge rail network expansion, national highway expansion and further improvements and expansion of the mass transit facilities available in Bangkok.[i]
This is easily the biggest and most expensive and expansive series of infrastructure developments to be undertaken in the history of Thailand. Some 56 percent of the budget allocated for the projects will be absorbed by a massive expansion of the rail network.
‘Developed infrastructure is critical for property investors in residential markets and Thailand’s government is committed to further expanding its investment programme to drive the economy forward at a faster pace than experienced in 2014.
As a rule of thumb, GDP growth of one percent translates into property market growth of around 1.5 percent and following a relatively flat year, 2015 should see a considerable improvement that will impact property prices significantly.
Analysts forecast that residential prices will increase by up to five percent, land (depending on location) by as much as 10 percent, while the cost of construction materials will rise by around five percent in 2015.’[ii]
The massive infrastructure development across Thailand, as mentioned, will largely concentrate on expanding and improving the rail network. That rail strategy is divided into two parts. The government has said the priority is six double-track metre-gauge lines, which will cost around 127.5 billion baht. Construction for these six lines will start between 2018 and 2019, and are expected to be completed in 2020.
The most expensive of these is the Saraburi to Nakhon Ratchasima line, running 132 kilometres and expected to cost 29.85 billion baht. The 185-kilometre line between Nakhon Ratchasima and Khon Kaen is the next most expensive at 26 billion baht. The Prachuap Khiri Khan to Chumphon line will be 167 kilometres and cost 17.3 billion baht.
The other three lines will run from Nakhon Pathom to Hua Hin (165 kilometres; 20.03 billion baht); Lop Buri to Nakhon Sawan (148 kilometres; 24.82 billion baht), and Hua Hin to Prachuap Khiri Khan (90 kilometres; 9.43 billion baht).
A further 13 projects are scheduled for completion by 2022. When finished, the double-track, metre-gauge rail network will have grown from its existing 357 kilometres to a whopping 3,994 kilometres.[iii]
The above-mentioned rail networks do not include another four 1.435 metre standard-gauge rail projects which were also approved by the cabinet in March this year.
The first of these projects is planned to run from Nong Khai, on the border with Laos, to Khon Kaen, Nakhon Ratchasima, Kaeng Khoi, Chachoengsao, Sri Racha and Map Ta Phut (Rayong).
The second is proposed from Kaeng Khoi to Ban Phachi, Ayutthaya and Bangkok, while the third will run from Tak to Phitsanulok, Phetchabun, Khon Kaen and Mukdahan.
All three of these standard-gauge rail projects will be constructed under a joint venture plan between Thailand and China. The State Railway of Thailand (SRT) will hold a 30 percent stake, private venture companies experienced in managing rail networks will have 30 percent and a Chinese rail developer will control the remaining 40 percent.
The management agreement states that Chinese managers will be responsible for operations for the first three years, then in years four to seven both China and Thailand will jointly manage the system. From year eight onwards, Thailand will run the service, with Chinese advisers.
Japan has also made proposals about jointly developing two specific routes in Thailand. The first would run from Bangkok to Phitsanulok and Chiang Mai (a distance of 635 kilometres) and the second from Kanchanburi to Aranyaprathet (339 kilomteres). The second line would split in Bangkok, with one line going on to Laem Chabang port and the other to Sa Kaeo.
Apart from these Chinese and Japanese joint ventures, the Thai government is also trying to engender private sector interest in two standard-gauge lines, one from Bangkok to Hua Hin and another from Bangkok to Pattaya and Rayong.
According to reports, two of Thailand’s largest companies, Charoen Pokphand Group (CP) and Thai Beverage Co, have shown interest in investing in these two projects.[iv]
As well as the rail network projects, the government also recognises the need to tackle traffic problems in Bangkok and its environs. To this end it has 10 mass-transit projects outlined, of which four are currently under way. Another two are pending cabinet consideration.
Increasing highway capacity is also a major task and most of the money allocated for this is to go into three key motorway devlopments. One is from Bang Pa-in to Saraburi, the second from Bang Yai to Kanchanaburi and the third from Pattaya to Map Ta Phut. All three highway expansion projects are to be completed by 2021.
Contained within the usual annual budget spending forecasts, the government has assigned more than 10 billion baht for 2015 and 2016 for road extensions and bridge construction in special economic zones from Mae Sot to Aranyaprathet, Trat, Mukdahan and Sadao.
Expansion of the Laem Chabang port forms a major plank in the water infrastructure plans while Suvarnabhumi, Don Muang and Phuket International Airports are all slated for further expansion. U-tapao airport is also expected to be greatly upgraded to handle more international flights and Mae Sot airport will be expanded in anticipation of added cross-border trade.[v]
Naturally enough, land prices have surged in those regions where major infrastructure is due to take place. In Tak province, for example, land prices have increased ‘20-40 percent’ while elsewhere the increases have in the order of 10 to 20 percent.[vi]
The Real Estate Information Centre however has warned that the surge in property process along the border provinces could lead to a property bubble if speculation continues unabated.
[i] Property Focus, Bangkok Post, p. 12
[iii] Property Focus, Bangkok Post, p.12
[iv] ibid, p.16
[v] ibid, p.17