The first phase of the hub has achieved full occupancy with a mix of around 15 well-known international names and local favourites from the retail and lifestyle sectors.

The mixed-use lifestyle development – owned by Boutique Prakhanong 1 Ltd, a direct subsidiary of major property developer Boutique Corp – is a new landmark in the bustling Phra Khanong neighbourhood.

The development is populated with tenants including Starbucks, Tops Supermarket, Fitness 24/7, Au Bon Pain and Spaces by Regus, the Amsterdam-based co-working space, all of which opened their doors in time for the grand opening.

Another exciting addition for the Sukhumvit-area hub is Treasure Factory, a Japanese second-hand product store, which has opened its first Thai branch at Summer Hill.

The grand opening marks the first of three phases for the hub, the second of which will be the opening of the Summer Hub Offices next door to Summer Hill, which will offer another 5,000 square metres of lettable space and is set to open at the end of the year.

An as-yet under-wraps third phase across the street from Summer Hill will be under way by the end of 2018, too.

Together, the combined phases will work together in synergy to create a mixed-use development that integrates commercial spaces and offices for a hub that truly serves and invigorates the local neighbourhood as a place to work, eat, shop, work out and hang out, the developer said.

Around 25,000 BTS users a day get on or off at Phra Kanong, close to Summer Hill, making it perfectly placed for seamless integration into local residents’ lifestyles.

“Phra Khanong is a buzzing, exciting place to live and spend time but, until now there was no hub at which to spend leisure time. We hope that with this community-minded development and the further two planned phases, Summer Hill will become the obvious epicentre of the area,” said Prab Thakral, president and group CEO of Boutique Corp, which is a listed company

“A mix of F&B outlets, retail stores and a supermarket, fitness centre and co-working space will really enrich the neighbourhood, creating a heart for this Sukhumvit community,” he added.

The budget also takes in industrial estate, solar farm, and exhibition centre projects.

Up to Bt1.3 billion will be spent to develop two office buildings in North Park Bangkok and in the Hat Yai district of Songkha province. Some Bt1.2 billion will be put into four new residential projects in the provinces of Prachinburi, Rayong, Buriram and Chon Buri’s Sriracha district, Sunthorn said.

A further Bt600 million has been earmarked for three new hotels in Buriram, Rayong, and Khon Kaen that will provide a combined 400 rooms. In Khon Kaen, the company will spend up to Bt40 million to set up solar roof that will produce 990 kilowatts an hour of power.

The remainder of the budget – Bt6.86 billion – will be used to develop the company’s first industrial estate in Rayong, on a site of 3,068 rai. The project is being developed under a joint venture with China’s Guangxi Construction Group. The Chinese company holds a 48 per cent stake in the joint venture firm, CG Corporation Co Ltd. The outlay is part of total investment of more than Bt8.5 billion for the development of the Rayong industrial estate over the three years to 2020, Sunthorn said.

The company’s investment budget will come from both its initial cash flow and borrowings from commercial banks, he said, adding that with the company now having lower debt, it has more room to take on bank loans.

In line with the investment plan, the company expects its net profit to grow in the double digits from the Bt800 million posted last year, he said.

For the hotel business, CP Land has revised its investment plan from an earlier plan that set out the development of budget hotels at PTT service stations. Originally, the company had planned to build 50 such hotels nationwide within five years.

It has suspended that plan, along with one to develop a hotel in Myanmar. The company needs to study the business risks and would meanwhile give more priority to domestic investments than overseas expansion, Sunthorn said.

However, CP Land is exploring investment opportunities in the UK hotel sector, given the decline in property prices as the country prepares to leave the European Union.

“We are only studying this possibility for now, and we would need to assess the business risks before making an investment decision there,” he said.

This year the company will focus on industrial estates in Rayong province, where benefits are seen from its location in the Eastern Economic Corridor (EEC) area, which also covers the Chon Buri and Chachoengsao provinces.

“We will focus on innovative and green industries under the Board of Investment’s promotions for investment in the EEC area,” Sunthorn said.

Under its plans for business expansion this year, CP Land targets its total assets increasing from Bt23 billion last year to more than Bt25 billion, he said.

“We strong confidence in the outlook for the country’s sustained economic growth and that this will generate strong demand for housing, offices, hotels, industrial estates and exhibition centres,” Sunthorn said.

“As a result, we have continued to expand our investments in the country rather than increase our outlays overseas. This will drive our business growth into the double digits each year.”

Following its planned public-private partnership project on a long-term investment in its 70-rai plot near Thailand’s Cultural Centre, worth more than Bt7 billion, and another 60-rai plot of land in Bang Pai District, the company will proceed with the PPP model in the second quarter of this year which is expected to be completed in 2 years, said president Kematat Paladesh.

He added that the company’s board of directors has approved the urgent implementation of its long-term strategies for the non-broadcast business development to eliminate risks and create new revenue sources. It will conduct a market sounding exercise to gauge interest of potential foreign and domestic investors in the two plots in Bangkok.

In addition, the company possesses a 40-rai plot of land in Nong Khaem District, housing transmission equipment and production studios of Bangkok Entertainment CoLtd. These assets will be transferred to MCOT Plc after the joint venture agreement between the two companies expires in 2020. There is also a 20-rai plot of land in the possession of MCOT on Pecthkasem road in Chumphon, with convenient access to Nakon Si Thammarat and Krabi, he said.

Earlier this year, the company invested Bt11.07 billion in a takeover of the Outrigger Hotels Hawaii chain of six hotels in four countries – Thailand, Fiji, Mauritius and Maldives.

The company is aiming for double-digit revenue growth from its 2017 total revenue of Bt6.22 billion and net profit of Bt571 million.

It also aims to boost revenues by 15 per cent this year, chairman Swechak Lochaya said on Monday.

As of the end of 2017, the company had total revenue of Bt725.44 million against a net loss for the year of Bt278.91 million.

Though Myanmar’s real estate sector last year faced many challenges, the government is planning to meet the housing needs of low-income people by working with development partners and private companies, according to speakers at the Myanmar Infrastructure Summit 2018 held March 20 to 22.

Win Naing, deputy director at the Department of Urban and Housing Development (DUHD), said in address on the second day of the event that housing needs would follow the population growth over the next two decades.

He estimated that an additional 4.8 million units would be needed for an estimated population of over 70 million people in Myanmar by 2040, over 22 per cent or 1.07 million units would be Yangon residents.

To fulfill the housing needs of Myanmar citizens, the DUHD has calculated supply projections for future demand and is planning to produce 20 per cent of the targeted units. Among them, 90 per cent of the housing units built by the DUHD will go to low income people while the remaining 10 per cent will be for middle income people.

The remaining 80 per cent of projected needs for affordable new housing will be met by private companies, he said, creating a huge opportunity for local and foreign investors. Myanmar has allowed private sector participation in the construction industry since 1990.

“Here in Myanmar, due to poor infrastructure and municipal services, most of the housing projects have to invest a lot. Housing is a long-term investment, takes a long time to develop, and is cyclical by nature,” he said.

The official stressed the importance of location when developing affordable housing projects.

“The value of a house largely depends on its location. Low income families prefer to live closer to places of employment, education and services,” he said.

Win Naing said the Union government has provided a revolving fund of 100 million kyat (Bt2.34 million) for housing development. Other sources of funding include 15 billion yen (Bt4.47 billion) of Japan’s official development assistance loan and a US$4 million (Bt124.69 million) grant for low-income focused community basic infrastructure development from the Asian Development Bank.

Myanmar’s Construction and Housing Development Bank was established in 2014 as a semi-government bank to provide housing finance mechanisms, including housing mortgage for the people and construction loans for developers. It has offered a “Saving to Home Ownership” product, which allows low income people to purchase a 1-million-kyat family unit on a 10-year instalment plan after they have saved at least 20 per cent of the home price at the bank.

“Midterm growth forecasts remain positive because the government has been active in the implementation of affordable housing projects in recent years,” said Win Naing.

“A surge in new infrastructure projects and upgrading of urban and national transport networks will drive the real estate sector growth here.”

The official said the construction industry would become a major driver of Myanmar’s growth over the next few years, thanks to four new megaprojects to be implemented using public-private partnership (PPP) schemes.

They are the New Mandalay resort city project on MandalayPyin Oo Lwin Road, eco “green city” and KoreaMyanmar industrial complex projects on YangonMandalay highway, and the Smart District project that includes Ayeyarwun and Yadanar highrise housing in Yangon.

Investment opportunities

Many more investment opportunities are waiting for developers as the government develops the PPP model. They include projects in land development, infrastructure development, high-rise apartments and mixed-used development, said Win Naing.

He believes the Myanmar Condominium Law enacted in 2016 will attract foreign companies to develop housing projects in the country, as it allows foreigners to own property for the first time in history. Under the law, foreigners can purchase residential apartments, and foreign investors are permitted to be engaged in condominium projects as co-developers. Less than 40 per cent of the total rooms in a condominium project are allowed to be sold to forฌ-eigners.

Ye Linn, a member of Myanmar Construction Entrepreneurs Association’s executive commitฌtee, said his group would implement a $200-million three-year project this year in an aim to supply 20,000 housing units by 2020.

He considered an unclear regulatory environment, land acquisition, tax relaxation, and labour issues to be major challenges for construction companies in Myanmar, along with a lack of technology, experience, infrastructure and access to finance.

Ye Linn said good financial planning, a clear plan, a good funding model and land consolidation are critical to successful implementation of housing projects. He urged creation of a favourable environment for investors coupled with drawing up a masterplan for affordable housing implementation.

“While project funding traditionally comes from the government’s budget, it is important to explore private funding that could be secured through PPP projects,” he said.

Robert Marshall, global director of planฌning and landscape and principal at B+H Architects, said master planning was the key to solving infrastructure problems at every scale – regional, city, community, neighbourhood and onsite.

Research in 2017 by Lian C, Ma Y and Wang C found that low interest rates lead to significantly higher allocations to risky assets even when the difference between risky and risk-free assets is held constant. The effect is more prominent when the rates are below the historical norm.

Does the Thai financial market encounter this type of behaviour?

Of course it does. The growth of risky asset investments – such as savings cooperatives and foreign investment funds – are significantly higher during a period of low market interest rates than when the market rate is high.

For example, during periods that the policy rate hovered around 1.251.5 per cent – the historically lowest – deposits at savings cooperatives grew by more than 19 per cent year on year each month compared to 9 per cent during periods with higher interest rates. Additionally, investment in foreign investment funds (FIFs) has also increased tremendously since the beginning of the downward trend in the policy rate in 2012. There has been an increase in net asset value from more than Bt353 billion to over Bt1.1 trillion in February 2018.

However, this kind of behaviour should not threaten Thailand’s financial stability unless investors are unaware of the risks regarding these high-yield investments, which could lead to inefficient investment decisions, such as over-investing in risky assets. Then, the important questions should be, “Are Thai investors fully cautious of the risks they have to take to earn those high returns?” and “Are there any risks relating to high-yield investment that investors may not be aware of?”

Let’s take a look at savings cooperatives whose combined assets were worth more than Bt2.2 trillion in 2016 – larger than the total assets of every medium-size bank in Thailand. First, considering the fundamental investment risk, credit default risk, saving cooperatives seem to have low nonperforming loans or NPL of about Bt1.2 billion compared to total lending to members of Bt1.8 trillion. This is because they receive loan repayments directly from their members’ payrolls. Yet, because savings cooperatives tend not to be members of credit bureaus, many of them can not holistically assess the debt burden of their members. In addition, many saving cooperatives allow their members to roll over their debts by taking out a new loan to pay off a maturing one. Therefore, low NPL figures may not reflect their default risk.

Another important risk factor can be analysed from comparing funding from members, in term of deposits and equity, and lending to members. For instance, one of the largest Thai saving cooperatives has funding from members of about Bt108 billion – much larger than members’ loan demands of Bt21 billion.

In order to generate hefty returns to pay the members their promising generous dividends and interest, these cooperatives have to invest excess funds into a variety of assets such as local equities and corporate debts.

FIFs, which have been gaining popularity with Thai investors, are also important risky assets, with a value of roughly 7 per cent of Thai nominal GDP. Most FIFs seem to be “quite” safe investments since the majority of them invest in fixed incomes. You have to know your risk to correctly estimate the compensation you would like to get and efficiently diversify your portfolio.

Contributed by Duangrat Prajaksilpthai and Poon Panichpibool. Views expressed in this article are those of the authors and not necessarily of TMB Bank or its executives.

The convenient location provides 1,260 square metres of sleek and inspiring office space, including 334 desks and three meeting rooms, said Noelle Coak, Country Head for Thailand, Taiwan and Korea of Spaces.

It offers an inspiring workplace that’s further strengthened by one of Bangkok’s best-known cafes. Spaces has teamed up with Rocket X for its first cafe within the workspace, helping to kick-start the day and add fuel to the creativity of the users. The cafe will also cater for meetings and events. Furthermore, Spaces’ second Bangkok location, at Chamchuri Square, is expected to be completed by May 2018, she added.