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Knight
Frank Research |
IMF shackles off
Prime Minister Thaksin Shinawatra this week declared Thailand
free of International Monetary Fund debts worth about US$12.29 billion,
paid two years ahead of the deadline in 2005. He also announced a government
plan to amend laws drafted under IMF terms, and to maintain the value-added
tax rate at 7% instead of raising it to 10% as suggested by the IMF.
Changes were planned for the state enterprise corporatisation law, the
bankruptcy law, the civil case procedure law and the land, condominium
and property leasing laws. On July 30, the Bank of Thailand made a final
payment of $1.6 billion to the IMF and other international creditors
which lent Thailand money during an economic crisis caused by devaluation
of the Thai baht six years ago. The prime minister said Thailand was
now free of an IMF debt worth about 500 billion baht and would not be
forced to enter such an IMF programme again. Thais had learned a lesson
from the pain. Thailand would not fall a victim to capitalism again,
he said. The way Thailand was able to clear its IMF debts before the
deadline reflected its economic stability, he added.
Lack of new supply pushes up
office rents
Bangkok’s office market continues to witness sporadic rental improvements
and a decline in vacancy rates due to limited new supply and moderate
demand. The market had been depressed for several years but had now
begun to move into the early stages of an upward cycle. Rents were picking
up in response to a lack of new supply and declining vacancy rates.
Should the market mechanism go uninterrupted? The next stage is to see
rents climbing to a level that is attractive enough to encourage new
developments in the premium office sector. However, when that will happen
is still in question. This will depend largely on to what extent tenants
can accept the rising rental levels. Bangkok currently has 1.21 million
square metres of premium office space in the central business district.
The 80,000 Sq.M. Central World Tower is the only premium office project
currently under construction. It is scheduled for completion in late
2004. The limited new supply has contributed to a continuing decline
in vacancies in grade-A office buildings. Average vacancy rates for
grade-A office space stood at 20%, compared to a peak of 40% in 1999,
and this rate is expected to drop further throughout the rest of this
year. The achievable rentals vary from 250-500 baht/sq m/month. Big
corporate tenants are still in a position to secure rents around 300
baht/sq.m/month.
Property supply market to see 10%
growth
fBangkok’s property market is expected to grow 10 percent
in terms of supply during the second half of the year due to increasing
demand for residential units, retail space and offices driven by the
domestic economys growth. There have been a number of projects launched
in the residential sector, most of which were condominiums and housing
developments, in response to high demand from end-users, as a result
of lower interest rates and tax breaks given by the government. About
4,000 units of new condominium units will likely enter the market this
year, and the number is expected to double next year.
