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Japanese Expat Growth Fuels Demand in Residential Rental Market |
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As a result of increasing Japanese production activity in Thailand, the number of Japanese expatriates
continues to increase, fueling demand for Bangkok
apartments and condominiums for rent, according to Mr. Theerathorn Prapunpong, Director of Residential
Leasing Services at CB Richard Ellis,
the leading international property consultants
in Thailand.
Japanese work-permit holders already comprise the largest group of work-permit
holders in
Thailand.
According to the Ministry of Labour, as of February 2008, 24,740 out of
122,262 BOI and temporary work-permit holders were Japanese, roughly equal to
20% of the total.
The most popular residential locations with Japanese expatriates are Sukhumvit
Soi 21-55. This area offers convenient access to a wide range of facilities,
including the BTS, expressways, supermarkets, hospitals, shopping and
entertainment complexes, as well as proximity to the Japanese school.
Supermarkets that cater more to the Japanese crowd include Fuji Super 1,
Fuji Super 2, the Emporium and Villa Market at J-Avenue.
When it comes to unit type, the tenant’s family size is the deciding factor. For
single tenants, a one- or two-bedroom unit in the region of 80 square meters is
sufficient, and budgets can range from THB 45,000 per month all the way to THB
75,000 per month if the person is an executive with a higher compensation level.
Japanese couples, even without children, prefer larger units, and these are
generally of the two-bedroom type, with floor space of around 100 square meters.
Budgets are in the THB 60,000-80,000 per month range, depending on the
unit, personal preferences, and spending limits.
Designs are quite important as Japanese tenants usually look for a higher level
of decoration and fittings, including wooden floors, high ceilings, built-in
closets and storage units, along with a spacious kitchen containing a large sink
and ample countertop space.
Units must include washing machines, four-burner electric stove, large fridge,
and a powerful water heater. However, a dishwasher is not necessary.
Required building facilities include a garden, children’s playground, and
exercise options such as a swimming pool or fitness center.
A wading pool, usually designed for children, is a plus. Also valued are
Japanese language capabilities or services and shuttle transportation to nearby
BTS stations, supermarkets, and hospitals.
“Also key is the presence of children-friendly facilities, such as ramps for
strollers, and other child safety precautions,” explains Mr. Noriyuki Matsuura, Manager of Japanese Residential
Leasing Services at CB Richard Ellis, a specialized team that focuses on
providing residential solutions for Bangkok’s burgeoning Japanese community.
High-speed wireless internet services should exceed 2Mbps as this allows for
viewing internet TV. As for cable TV,
the most popular package is the one that comes with the NHK option.
Most Japanese children tend to go to the Japanese school near Rama IX Road. Other
international schools are not popular with Japanese children, especially until
high school (age of 15 or so). This
is partly because it is essential for Japanese children who want to pursue
university in Japan to go to the Japanese school.
In line with Japanese investment in Thailand, the number of students
enrolled at the Japanese school has been steadily rising as well.
The school has grown from 1,759 students in 2001 to 2,401 students in
2007.
As far as contract terms, most residential leasing in this sector is done on a
one- or two-year contract. In two-year contracts, there is usually a
“diplomatic” clause that permits early termination in the event that the tenant
is transferred overseas for any reason. A 60-day notice period is usually
required in this case. In general, Japanese tenants are more likely to move at
the end of their lease period if they are not satisfied with the accommodations
and service at the property.
Apartments in downtown Bangkok enjoyed an occupancy rate of 90% in Q1
2008. No new supply was completed
during the quarter. Future supply
expected for completion in 2008 includes The Grand Sethiwan 2 housing 172 units
on Sukhumvit Soi 24 and the newly renovated Nithi Court comprising 14 units on
Sathon Road.
CB Richard Ellis expects that demand, especially from Japanese
expatriates, will grow in line with or outpace supply, keeping occupancy rates
well within the 87-93% range seen since 2000.
CB Richard Ellis Thailand : 21 May 2008
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99 year leases are now needed in Thailand |
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99 year leases are now
needed in Thailand
source: Pattaya Today May 16 2008
Freehold and leasehold wouldn’t matter
NOTWITHSTANDING the current problems in Thailand of a super baht, rising prices
and continuing political uncertainty, the global trend amongst expat retirees is
to buy property in the chosen destination. Thailand is far and away the most
popular country in south east Asia for westerners and easterners planning to
make a fresh start in their fifties or sixties.
Research suggests that most of these potential buyers spend from one to three
months in the country before making their selection of property. They spend a
lot more during that period than average tourists, thus composing a segment
which is very desirable in overall financial terms. In areas such as Pattaya,
over 90% of holiday homes costing more than four million baht are believed to be
bought by foreigners.
Condominiums are obviously a popular option as the foreigner can own the unit in
his or her own name provided that not more than half of all the flats in a given
development are owned outright by aliens. Even where the foreigners exceed the
50% ceiling, there are several alternative routes to buy including the setting
up a company. Some foreign owners are married to Thai nationals and may feel
comfortable with the documents in a Thai name.
But Thailand, as is well known, does not allow foreigners to own freehold land
and restricts leases to 30 years. It’s common in resort areas to provide leases
of 30 years, along with options to renew by 30 years each (30+30+30), and the
prices tend then to be similar to the freehold value. However, there is no
experience of what actually happens after the first 30 years expires. It seems
that the freeholder and the lessee will need physically to contact each other to
renew the lease even though the full price has been paid. As buyers frequently
remark, this is a complicated process.
It would be the best way forward if a simpler process was established to permit
foreigners to have a longer lease than 30 years. The most suitable lease would
in fact be 99 years which has the advantage of being well known in European
countries. The lease would be registered for 99 years with the land department
upon payment of the lease value. Such properties could then be sold without
equivocation at virtual freehold prices.
In turn, Thailand would become more attractive to overseas investors than
competitor countries in the region and would generate a growing demand for
resort homes at the mid and high end of the market. In other markets, including
Vietnam, 70 year leases are being offered to aliens with options of multiple
extensions.
China, for its part, offers up to 70 year leases as well and Singapore up to 99
years in some specially promoted areas such as Sentosa Cove. Malaysia as its own
special retiree programme and offers both the opportunity to buy freehold land
or to obtain leases up to 99 years according to the location in the country.
The investment market would also benefit as foreign institutions and property
companies tend to fight shy of countries where the hotels and office blocks
can’t be owned by foreigners. Cambodia has the same problem at the moment as
major investors await the outcome of a government committee currently looking at
lease and purchase options for non Cambodians.
The Thai government, if it is serious about longer term tourism and investment, has to bring the property laws up to date.
One of the most important recommendations, if not the most important, is the
extension of leases on freehold property. If Thailand is to be a serious player
in an increasingly competitive environment for cash inflows and transfer of
capital, it’s high time that property legislation was put under the microscope.
A review is already long overdue.
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