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High net worth, global property speculators, both private and institutional, hold out a positive lifeline to those in the property business who are considering the effects of the global slowdown.
Ms Kulwadee Sawangsri, director of Investment Properties at CB Richard Ellis, said: “In many ways, property investment has become similar to the equity markets with investors looking for worldwide opportunities.”
These global property speculators are generally regarded as being relatively recession-proof as well as less price-sensitive and still have considerable assets.
The more astute among them are diverting from banks and stock markets into the more tangible, value-added investment of property, especially off-plan with its still strong potential of high return on investment (ROI) and capital appreciation yields; as many developers are well aware!
But where to find them? Significantly, the answer to this is that, with a little encouragement, they might come to you. Why? Well as Obelisk International, winner of Business Britain’s International Property Specialist 2008 award, says” “The one question on every investor’s lips is, ‘where next’?”
According to a recent survey the countries with the soundest banking systems are Canada, Sweden, Luxemburg and Australia. New Zealand ranks 8th with Ireland 9th, whereas the countries which traditionally supply the strongest Pattaya property buyers – the US, UK and Germany ranked 40th, 44th and 39th respectively.
London is currently the most expensive global location. However, even its property prices have started to fall, according to the latest data from the property firm, Knight Frank. Except, that is, for “super-prime” properties in Central London, where the value of houses priced above £10 million is actually up 16.7 per cent from a year ago.
Should those house owners decide to sell and relocate to Pattaya, they’d have a healthy Bt570 million to invest! UK property investment specialists 7CI (Seven Continent Investment), has reported that more than 76 per cent of their investors are responding to the global credit crunch by investing in overseas property.
Of this 76 per cent, just over 56 per cent are ‘seizing outstanding investment opportunities,’ while 20.18 per cent are ‘investigating investments’.
Founder and CEO of 7CI, Alistair Powell, says: “The current economic climate presents a world of opportunities for those that are willing and able to take them. Some 85.58 per cent of our investors tell us they plan to take their deposit saved for a UK property and purchase abroad.”
He says that more than 60 per cent are looking to Asia: Malaysia, Thailand, Vietnam and the Philippines being the most popular destinations. 7CI is apparently experiencing an upsurge in expressions of interest about its properties in this region.
As for Russia – “in a struggling market, Russian buyers have become the Holy Grail, an almost mythological subset of consumers who will swoop in to gobble up properties at outrageous prices,” says International Herald Tribune’s Kevin Brass.
Russia, according to Denis Nemtsev, director of one of Thailand’s leading Russian real estate agents, Farang.ru, is currently suffering the collapse of its stock market and rapidly rising property prices in Moscow, effectively, ruling out private ownership.
All of which conspire to force the Russian high net worth investor, namely middle and top managers in major Russian oil and gas enterprises, international corporations and business owners, to look elsewhere.
Pattaya still leads Russian preferences over Samui and Phuket, developers and home owners may be pleased to hear. But, take note, Mikhail Kelim, head of Prian.ru, maintains Russian buyers are growing more “educated” and shopping for new locales.
Russian buyers are “reading analytical articles, checking out market situations and are not just buying because the country is cheap or fashionable to do so.”
With the US and Europe attempting to weather the storm, all eyes are focussed on Asia as being the engine that could sustain growth and avert a recession, especially India, which is continuing to attract investment, despite soaring inflation.
A significant aspect of the current crisis has been the desire for Western financial firms to seek capital injections from sovereign wealth funds, a number of whom are based in Asia – a further indication of how the balance of economic and financial power is shifting from the West to the East.
Location-wise, SE Asia has effectively become the centre of the world, being equally accessible from the States and Europe on the one hand and Australia on the other; Pattaya conveniently stands equidistant from the mega-economies of India and China.
Locally, the neighbouring fellow ‘Tiger’ economy of Singapore has been officially declared as being in recession. However, Morgan Stanley (Singapore), one of the largest financial institutions in the island state, is still thriving and maintains credit is still available ‘for the right deal and the right client’. Morgan Stanley states that Asia contributes one sixth of its global revenue and they expect this to continue rising.
Although China has seen exports to the US falling and equities and housing markets slumping, its growth still outstrips most emerging economies.
China retains the world’s largest sovereign wealth fund that could be used to stimulate both the local economy and invest in other emerging markets for both financial returns and political influence.
As an anti-recessionary measure, China, Morgan Stanley speculates, is likely to cut interest rates five times by the end of 2009 and significantly increase its spending, again to stave off the effects of the financial meltdown. Taiwan, witnessing a weakening domestic economy, affecting consumer confidence and falling real-estate prices, is also looking elsewhere to reap superior returns.
And don’t neglect the Middle East. HSBC Halbis Frontier Markets fund manager, Andrea Nannini, stated recently: ‘‘I think that at the moment people are finding it difficult to know where to put their money.’’
He, himself, has been increasing the position of his US$240-million fund in the Middle East.
Vast sovereign world funds like those in the Gulf are apparently increasingly reluctant to risk money in shaky Western markets. Spending that money at home or investing in property in fellow emerging markets, like Thailand, would provide mutual benefits for themselves and such locations as Pattaya.
Conveniently, there’s a Kuwait International Property Show from March 9-13, which may interest Thai-based real estate folk.
Finally, the 51 per cent (Thai ownership)! Neil Robbirt, chief executive of Global Investments International, sees a strong likelihood of a depreciation of the Thai Baht in response to both the global financial turmoil, and the pressures from months of domestic political tension.
However, Robbirt does point out the corollary of this – that the emerging middle class is prevented from buying property because
Thai banks may no longer lending as freely.
Nevertheless, according to international financier-entrepreneur, Sonny Souvannavong (who featured in our last issue), the high-end Thai buyers are relatively recession-proof, so will still be in the market.
All it needs is a determined Thai marketing campaign because, as Kanana Katharangsiporn of Bangkok Post’s Property Focus 2008, says: “Some developers need attractive campaigns and promotions, including events at project sites, to boost sales and encourage customers to speed up their decisions.” Ω
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Buyers still out there.
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