High End Developers Reshaping Pattaya Market

High End Developers Reshaping Pattaya Market

Pattaya Originally uploaded by yangon.

Pattaya is the jewel in the eastern development crown, but it’s by no means the only diamond in the rough. Developments in locales such as Jomtien, Sahathip, Pratumnak Hill and Mabrachan Lake are providing good investment opportunities…

… And with a new international airport opening just 40 minutes away, one could say that the sky is the limit for the sheer size and scale of future Pattaya property developments, and the international agents that wheel and deal them.

Spotlighted in countless local and international publications, the potential for property investment on the eastern seaboard is attracting an increasing amount of attention. With the bursting of Thailand’s property bubble in 1997, the market was pretty cool for several years thereafter, but the past half-decade has seen some tremendous growth potential.

“International agents are very interested in this area,” said Roland Steiner of Siam Royal View Projects. “The problem is that most projects are too small for an international agent to get involved with. They have a long lead time for sales and typically, good projects are sold out before those agents have had a chance to respond.” Mr. Steiner went on to say that this trend was telling: the internet remains the primary tool for overseas agents to research potential investments, but even the bang of instant knowledge at their fingertips doesn’t seem to let them in on the game fast enough to scoop the locals.

Henri Young from Raimon Land agrees that international agents are starting to take a greater interest in the area. “Overseas agents are only just starting to pick up on this market,” he says. “Previously, they channelled their efforts towards Phuket, but the positive press, scale of projects and potential for growth has lured them into the market. This should help educate and attract more international prospects.”

That being said, with the economy emerging from a long slumber, developments in the region will most definitely start to grow in size, as will the time and money spent by foreign agents in ensuring that they’re able to stake their claim. David Gray of East Coast Real Estate echoes the sentiment.

“The area is starting to attract a lot of attention, especially from big agents like CBRE, Jones Lang LaSalle and others,” he explained. “Many of them are doing business in this area but don’t yet have offices here, which will change over the next little while.”

Walking around the town, it’s easy to see that there’s a large contingent of companies ready to dive into the lucrative, expanding market. Sales agents and property companies are nearly as easy to spot as 7-11’s. It’s clearly a market rife with companies waiting for the coming influx of cash.

It was to be expected after all, for every success story in Thailand, be it movies or fashion or restaurants, there are five others that crowd onto the bandwagon, often without meeting the minimum requirements that others spend so much time attaining.

“When we started here ten years ago, there were three main property companies, ours included,” says Gray. “But now, there are over 120 of them, all jockeying for slimmer and slimmer pieces of the pie.”

Engaging in casual, chew-the-fat type of conversation with people involved in the area’s industry leads one to believe that of this large number of property offices, few are capable of navigating the treacherous waters of the property market. Probably about 90 percent of the companies in the area are seen as “cowboy” entities, there to get as much as they can, as quickly as they can. In this regard, the ingress of international “big boys” setting up shops in town will probably be looked upon as a blessing.

In response to this question, Gray says: “In order to compete with these guys, you need professional service that offers the right properties, the right contracts, the right prices and the right commissions. I think that within the next few years, many of these smaller, less professional operations will be gone. It will give the industry the professional edge that it needs to maintain in order to thrive.”

Indeed, ten years ago when Gray set up East Coast Properties, the market for lavish, expensive condos simply didn’t exist. Pattaya was a boom town, but the property influx that was to define it for the new century was years away.

“A new breed of developers has appeared with the emergence of the high-end Pattaya market,” said Steiner. “High end constitutes properties that cost 10 million Baht or more. This market segment did not exist 5 years ago.”

One of the clearest examples of the new trend in high-end living is La Royale Beach, a new project being managed by Wise Power Group. The 34-story tower on the Jomtien side of town boasts its own private beach, jogging track, underground parking and a host of other tweaks and amenities that make it a first class property. And the view is excellent.

“I’ve worked with many five and six star hotels and top-tier condos in Hong Kong, and I have a lot of experience with what works, what doesn’t work and what tenants expect,” says Wise Power Group Chairman Eric Lai. “I made a very conscious effort to take what I’ve learned and apply it to La Royale to make sure that we develop nothing less than a first-class environment.”

Gray, whose East Coast Real Estate is the sole vendor for La Royale Beach, says that it’s his single biggest project right now. “We’ve sold over 75 percent of the units there, which represents over 1 billion baht for that project alone.”

This is only the latest of what will surely become a trend in first class properties catering to those willing to dig deep to buy that kind of lifestyle but will sales levels eventually come back down to less lofty heights?

In Steiner’s opinion, things look like they’ll stay peachy into the near future. “The condo market anywhere is very cyclical due to oversupply situations, which makes it more competitive and risky,” he said. “Smaller houses in the 2 to 6 million baht range are being stamped out 100 to 300 units at a time, so oversupply is definitely possible in that market. But many high-end projects are quite small 5 to 30 units  which are bought and then built, so it’s hard to have an oversupply in this situation.”

But Pattaya isn’t a self-supporting economy, sequestered from the rest of Thailand; the two are linked. Keep in mind that over 80 percent of housing units in this area are bought by Thai buyers, who are a product of the economy. Growth here is a direct mirror of economic growth in general, and we all know how quickly that can change.

Driving down the first beach road in Jomtien it’s strange to think that in several years, the entire area will be likely be spiked with high-rise condos offering views that would make Donald Trump pine for a spot on the waiting list.

“I think that Jomtien will be the next “hotspot” for the region, if they do it right,” answered Gray when asked where developments will start springing up next. â”If they go in with the right planning and infrastructure, you’ll see big developments there for years to come. It’s got 7 km of beach and miles upon miles of land that’s just empty. There is huge potential.” Grey went on to suggest other prime areas around town include Pratumnak hill, which is mostly smaller, residential developments, and Mabrachan Lake, as it has easy access to motorways amid a tranquil setting. He explained that these two areas simply don’t have room to support massive, sky-scraping towers of steel and glass – and that may be a good thing.

In spite of everyone’s love for luxury, there’s still only so much a person can use. Gray, despite representing many of these large pieces of property, sees a time when buyers will tire of them and look to invest in smaller, cosier places to live. “I think that’s what we’ll start to see more of eventually, because many of these huge spaces are just too big,” he said. “You don’t need an extra 20sqm of space for a sofa.”

This is a fair assumption to make. Although several massive projects have already been planned for Jomtien, one can imagine that land prices out this way are still reasonable enough to warrant smaller, more personal spaces that still provide a return on investment. An example of this on Pattaya beach is the View Talay Condominium project, a 26-story condo offering mainly studio and one bedroom units that many think will be quite successful. Steiner seems to agree, echoing Gray’s comments when he says that the market in Pattaya is being driven by a growing Thai middle class, taking up most of the properties in the 2 to 6 million baht range, and they’re growing fast.

Mr. Young and Raimon Land has bet big that the Wong-amat beachfront will be a desirable location that will draw investors to North Pattaya for their Northpoint development. “Wong-amat offers a more peaceful alternative to Central Pattaya and Jomtien with a distinguished heritage, relative proximity to Bangkok and superior beachfront,” he said. He also adds that the Raimon Land research shows that demand will stay high for some time to come.

“Our pre-sales interest in Northpoint indicates that several qualified buyers are scouting the market,” he said. “Also, geographically speaking, there are still some good sites in and around Pattaya and while niche and price driven locations will continue to emerge, the main draw card will still be the city itself.”

The biggest change that the region has ever seen will arrive shortly, with the opening of the Suvarnabhumi International Airport. Depending on whom you believe, the airport will either open this June, this July or this December, but no matter which month it is, it will undoubtedly have a tremendous effect on the area, transforming it nearly overnight. Mr. Young recently toured the facility and came away impressed. “Our tour revealed a tremendous facility with a credible ‘wow’ factor. We’re looking forward to its opening.”

But it’s not just Pattaya that will profit from the new airport. The surrounding areas will get an injection of cash and opportunity as well. Steiner says that with the new airport, buyers will be ready to venture down not just as far as Rayong, but Maptaput and Laemchabang ports.

He also sees Koh Chang benefiting from the new air link and is hoping to take advantage of the island’s proximity to the airport with Siam Royal View’s development there (as well as the one in Pattaya). “It’s conceivable that you could be in downtown Pattaya faster than you could be in downtown Bangkok. Just compare the lifestyles,” he says with the authority of someone who’s maybe had a bit too much of big cities.

Gray agrees that things will change drastically once the planes start landing. “You have industrial ports, deep sea zones, tourism and schools. I think a lot of companies will relocate from Bangkok to here. With the planned high-speed rail link it’ll make the whole commute a pretty painless experience.”

“It will be faster to get to Koh Chang from the new airport than it will be to get to Patong beach from Phuket airport. You can also get flights to Trat from Bangkok 3 times a day, and they’ve just announced a Samui-Trat flight, with Phuket to follow,” explained Steiner. “The effects of the airport will be explosive.”

But when people see big potential, they tend to have big ideas, and developments don’t come much bigger than the 91 storey Majestic Tower, a new skyscraper that will have its official launch sometime next month. There is surprisingly little information to find online, but queries to the listed developer (Siam Best Enterprises) end with an email that says: “According to our architects this will be the tallest residential building in the world and we spent considerable time engaging world renowned experts in the field of property construction.

It has been in the planning for almost a year and we anticipate the official launch will be within the next six weeks.” Undoubtedly, the building will change the Jomtien landscape (and probably Koh Chang’s too you might be able to see the behemoth from the faraway island), setting the bar pretty high for others to follow.

Thankfully, the effects of the ’97 crash have been studied and lessons have been learned. “It’s important for potential investors to remember that the crash of ’97 was not actually a real estate crash, but a currency speculation crash,” said Steiner.”There was exorbitant over lending by banks at the time, but if you try to get a loan now, you will feel the mechanisms that prevent serious overheating.”

Gray, who came to Thailand shortly before the market fell, agrees with this statement. “The banks used to give money to anyone he’s your brother or he’s your friend, have some money. But they’re much more careful now and it’s much more stable.”

Nevertheless, skittish nerves about all the activity on the eastern seaboard are hidden not too far under the surface. There are a few projects around that trigger raised eyebrows when their names cross the table. For obvious reasons, people don’t want to go into too much detail, but the best advice that anyone can take is to research where a project’s financing is coming from and how it’s structured. There have been projects in the past where the money has flowed in, the construction has started and then  poof. A half-finished building and a few unscrupulous individuals who flee the country with suitcases full of cash. Being forewarned is being forearmed. Having a real estate lawyer familiar with Thai law go over things probably wouldn’t hurt.

But, with prices rising an average of 30 to 40 percent each year for the past several years one of the highest rates in South East Asia  the future is definitely looking bright for property investments. Many people are taking advantage of the market by investing in short term properties – getting in and out with a small but easy return. “One guy I know bought a property for 9 million baht, and sold it for 12.5 a few months later,” said Gray. “That’s not too bad.â”

Source: Property Report Asia