“Property firms have to shift from being developers of residential projects to providers of living solutions, by finding as many ways as we can to serve the demands of customers,” Sansiri Plc president Srettha Thavisin said recently.

“Customers need more after-sales services to match their new lifestyles.”

Meeting that need, even as residential sales face some short-term challenges, has led Sansiri to budget Bt1.5 billion to invest in property tech from 2018 through 2020. The money is mainly going to startup businesses in Thailand and overseas, said Srettha. It is difficult to predict the return on investment in startups, he added, but the company in any case has made it a priority to add to the solutions it can offer customers.

Its top-priority investment at the moment is in developing a robot to serve its clients and the company will then consider developing a commercial version.

“If our proptech enjoys success on a commercial scale, it would generate long-term income for our business,” he said.

Other property firms are taking parallel paths.

Origin Property Plc has set up Primo Service Solution Co Ltd, an arm for investment and collaboration with startups as the company develops its “digital butler service” and others applications, along with artificial intelligence to serve its customers. It also wants to provide the service to other property firms.

“We believe in innovations and technology that will change the business model of property firms from property development to providing services offering smart living solutions,” said Origin chief executive Peerapong Jaroon-Ek in a recent interview with The Nation. The company plans to apply for the listing of Primo Service Solution Co Ltd in the Market for Alternative Investment as soon as the business generates revenue of Bt1 billion, which could be reached this year.

“We expect our investment in technology is the way to differentiate ourselves from other property firms in the market,” Peerapong said.

SC Asset Corporation is also turning to investments in startups and technology, through its new investment arm, SC Urban Co Ltd which has invested in Fixzy Co, a startup firm providing home renovation and repair services through the “Fixzy” application.

“Our business strategy is to be the living-solutions provider,” said SC Asset’s CEO, Nuttaphong Kunakornwong, recently.

Like Peerapong at Origin, Nuttaphong sees technology as the means to create services that differentiate the company from its competitors.

Anthony Couse, CEO of JLL Asia Pacific, noted that though real estate has been viewed as a traditional business, the time is now right to embrace technology, digitisation and collaboration.

“We’re taking an agile approach to technology that will allow us to meet our clients’ needs today while preparing for the opportunities of tomorrow,” he said.

“We believe in big corporations being part of the larger tech ecosystem, engaging with the startups and academic researchers, and learning from entrepreneurs and innovators,” said Couse.

“Proptech is an opportunity for us all to work together, and that’s really exciting.” Proptech has been described as a burgeoning new sector whereby technology solutions are used to solve real-estate problems, added Couse.

With the property market in the grip of intense competition as consumer demand for residential projects decline, most property firms are investing in projects that generate recurring income in order to sustain long-term growth.

Investments that generate recurring income run the gamut in both the domestic and overseas markets, including hotels, office buildings, apartments and warehouses.

Most local firms are also expanding their investments in proptech startups, developing applications and other innovative setups related to the property sector.

“We are expanding our investment in businesses that generate recurring income with a yearly budgฌet of Bt2 to Bt3 billion. We have stepped up our acquisitions of properties in the US, mainly apartments. After renovation, the properties were put up for rentals or sale,” said Naporn Sunthornchitcharoen, Land and Houses Plc’s chairman of the board of directors, adding that it had generated a double-digit return on investment for the company annually.

“We have also invested in other businesses that generate high return on investment. It balances our total revenue and net profit to ensure strong yearly growth.”

Land and Houses Plc was the first property firm to create a business model based on developing residential projects for sale while also investing in other businesses that generate sustainable income for the company. Up to 30 per cent of its net profit were contributions from subsidiaries and recurring income, helping to maintain the company’s net profit margin of above 20 per cent annually – higher than the average of 14 per cent among other developers in the market.

Given the success of Land and Houses’s business model, other property firms are following suit, investing in businesses that generate recurring income. For example, Origin Property Plc, which entered the property sector 10 years ago, invests in residential projects for sale and develops hotels.

Chief executive officer Peerapong Jaroonek said the company will invest up to Bt10 billion to develop five hotels between 2017 and 2020, expecting recurring income accounting for 20 per cent of the company’s total revenue by the end of that period. Two of the five planned projects will be opened and operating by the end of this year.

Meanwhile, the company is also investing in proptech and startups through its subsidiary, Primo Service Solution Co Ltd, which is seeking new business services that could meet the needs of all property firms, says Peerapong.

“This will generate recurring income to our business. This is a part of balancing our portfolio,” Peerapong said. He added that “our business model was inspired by Land and Houses Plc, which has long experience in this industry and also shows strong financial results every year”.

For its part, SC Asset Corporation Plc set aside a Bt1billion investment budget to acquire apartment buildings in the US last year, said Nuttaphong Kunakornwong, the company’s chief executive officer.

The company’s recurring income from its office buildings in Bangkok now accounts for up to nine per cent of total revenue, and is expected to reach 15 per cent in 2020 with the boost from its investment in the US, he said.

Meanwhile, the company will invest Bt1 billion in startups for the development of applications and services related to the property secฌtor as part of its strategy to generate recurring income, he said.

“We need recurring income to balance our business amid the slowdown in market demand for resiฌdential units, which is cyclical within the industry. Recurring income will balance our portfolio in terms of revenue and net profit for the long term,” Nuttaphong said.

Pruksa Holdings Plc has identified the hospital sector as the means to revenue diversification, having invested Bt1 billion in 2017 to develop a hospital that will open in 2020.

The company sees the need to create recurring income, says chief executive officer Thongma Vijitpongpun.

LPN Development Plc’s chief executive officer and managing director, Opas Sripayak, said the company had begun work on an office building last year that will open in 2019.

The company has also created a new business model for its completed condominium projects with unsold units.

Recognising the market niche of people who want to live in a condo but are unable to purchase the unit, LPN is offering contracts that allow tenants the option of buying the property in the future.

When the tenant has accumulated sufficient buying power, the contract will be changed for the tenant to acquire the unit, he said.

“We have to find ways to generate income from our assets,” Opas said.

The inner Bangkok areas Phloen Chit and Chit Lom reveal an almost 80 per cent growth in demand and close to 20 per cent growth in supply, according to figures going back four years, the company says.

Over the same period, demand within the Sukhumvit area grew roughly 50 per cent and supply grew 30 per cent, and demand growth in the Phya Thai-Ratchathewi area was an astounding 570 per cent and supply growth was 240 per cent.

Condos in resort cities such as Phuket and Hua Hin continue to be driven by public infrastructure development. The resale condominium market – offering the advantages of lower prices and higher tangibility than projects under construction – is expected to become energised in early 2019 as buyers hurry their purchases before new mortgage regulations take effect, according to a press release from Plus Property on Thursday.

Anukul Ratpitaksanti, the company’s managing director, said findings from Plus’s research and strategies development division indicate that the residential market is continuing to expand. This is especially true for properties in central business districts and nearby zones that are serviced by the electric train, and where people generally prefer to live.

The expansion of the urban area and the increased coverage of mass transit have resulted in an expansion of the market for residences and its foray into several new areas. Condominium residences are in particular experiencing remarkable growth, triggering a rise in the price of land along mass-transit lines and their extension routes, which then prompt increases in the prices of new condominiums.

In addition to factors related to transportation, areas in the vicinity of the electric train also have the characteristic of becoming the commercial centre. Community malls, career hubs and other buildings contribute to heightened demand for condominiums for locating condos nearby.

Plus’s compilation of data over the four years period between 2015 and 2018 revealed that demand for the Sukhumvit location grew by roughly 50 per cent, whereas supply only grew by 30 per cent. Demand for the Phya Thai-Ratchathewi location grew by an astounding 570 per cent whereas supply grew by 240 per cent. The limited supply was due to the low number of available projects and the lack of any new project launches in certain years. For the Phloen Chit-Chit Lom zone, demand grew by an average of 80 per cent while supply grew only 20 per cent. This situation meant that demand could be expected to rise exponentially whenever a new project goes on sale.

These figures reflect how demand has significantly outgrown supply. This imbalance resulted mainly from the limited space available for developing new condominium projects in Bangkok’s inner zone and in central business districts. Despite there being high demand from potential buyers, development of new projects was difficult. To this end, resale condominium units at already-completed projects are seeing an attractive growth, due to their ability to provide solutions to the demands from those who want to live at downtown locations.

For projects in the Phya Thai, Asok and Sukhumvit zones, a condo unit at a new project has a price that is almost 10 per cent higher than one at a resale project. Within these zones, resale prices remain lofty and therefore there is less of a difference between the prices at new and resale projects, unlike the gap between prices at projects located in Bangkok’s outlying areas.

One contributing factor for the everlasting popularity of inner Bangkok condominiums is the return on investment. Capital gain and rental yield are similarly high for inner Bangkok. Projects producing returns that are higher than the average return are generally found in Sukhumvit and outer Sukhumvit areas where the total return is about 10 per cent per year, with a tendency to increase continually. It should be noted, however, that projects that recently launched within the past two to three years produced less capital gain.

It can be reasoned, then, that prices of new projects have been increasing each year. In order to profit from a price difference, an investor may need to hold the property for at least three years while accepting a rental yield of 4-6 per cent. However, overall return will eventually increase because of the forecasted tendency for an ever-increasing price level.

The expansion of urban areas and the state sector’s propagation of infrastructure and transportation projects towards major tourism cities are also important driving forces for the growth of the condominium market.

This is especially true for the Phuket zone where projects exist for the development of Phuket Airport’s third phase, the Phuket Smart City, and the transportation infrastructure. Those developments will accommodate the future growth of Phuket City. Owing to these developments, prices of condominiums in Phuket have been rising over the previous 3 years – the rise was 12 per cent, on average.

Demand for real estate in the Hua Hin locale has also been rising overall. The zone will benefit from improved transportation linkages with Bangkok in the form of a high-speed rail link and a motorway. Those transport links, coupled with the area’s existing liveability factor, drive up demand for real estate in Hua Hin.

The price of land in the 2016-2019 accounting cycle increased by almost 30 per cent from the 2012-2015 cycle. Meanwhile, prices in the resale market have also continually risen over the past five to six years. The return made from reselling a condo unit was as high as 60 per cent, while return from rent still yielded a hearty 4-5 per cent per year. Thus, condominiums in holiday hotspots remain an equally enticing choice.

“Our prediction is for completed condominium projects to become revitalised through the resale scene in early 2019, before the Bank of Thailand’s LTV (loan-to-value) reduction measure takes effect in April. The resale units present a better investment choice because the layout of the condominium and the condition of the room can be promptly inspected. As well, the units are ready for a move-in as well as ready to earn income.

“Also, developers are currently releasing special promotions, and this presents a good opportunity for people who want to purchase property before the LTV reduction measure comes into force, in order to benefit from prices that will increase in the future”, said Anukul.

He added that the group was confident of targeting the upper-market segment for low-rise condominiums in the central business district of Bangkok and the resort destination of Pattaya.

Habitat Group will also strengthen the group’s overall position by increasing its recurring income portfolio, including two new hotel developments as well as an expansion of the group’s international client base from new markets, namely Japan, Taiwan, Singapore, India and the Middle East.

This strategy of widening the market from China and Hong Kong earlier, will support the company’s risk diversification.

Three of five projects are planned for Bangkok’s Thonglor, Phrom Phong and Asoke areas, while the next two projects will be located in Pattaya’s central business district.

The company launched new projects in Pattaya where they are seeing strong demand for residential property located close to the Eastern Economic Corridor Development Project, he said.

“Based on these factors, we are confident of moving forward with our growth plans and double the value of our properties for investment. We anticipate a positive growth in the property market this year, as it will be driven by the government’s continuous infrastructure development projects, further supported by various private sector investments, especially in the EEC region.

“However, the company has realised it is essential to develop competitive products for the market as well, and we will ensure our designs distinguish ourselves from others and make us stand out from our competitors,” said Chanin.

The company will look for opportunities to open up new markets in addition to the Thai, Chinese and Hong Kong markets in which Habitat Group are strong. The company will reach new markets such as the Middle East as well as Japan, Taiwan, Singapore and India for Asia.

Last year, the company reported total sales of Bt600 million from international buyers. This was 30 per cent of total sales, and Habitat Group expects it will grow to 40 per cent of total sales this year, Chanin said.

“Our investment budget will come from the both our initial cash and [results of our study into issuing] a debenture, but we cannot disclose how much our debenture issue will be this year,” the company’s CEO, Peerapong Jaroon-ek, said yesterday.

With the decision to invest in the land purchase behind them, the company plans to launch 15 new residential projects worth Bt26 billion this year under three brands – Park Origin, The Origin, and Britania – as well as open two hotels at year’s end.

The Park Origin brand will offer condominiums at a price range of Bt4 to Bt6 million per unit. Meanwhile, Origin condominiums will be priced between Bt1.6 and Bt2.4 million per unit. Britania brand will offer low-rise residences including townhomes, twin houses and single-detached houses spanning Bt2.5 to Bt6 million per unit.

Three of the 15 projects will be under Park Origin brand, for a combined worth of Bt9 billion, and located in three areas – Ratchathewi, Rama 4 and new CBD.

Seven of the eight projects under Origin brand will be launched in Bangkok, in Sukhumvit, Ratchada, Lat Phrao, Ramkamhaeng, and Ramindra, and worth a combined Bt9 billion. The eighth project, worth Bt2 billion, is to be located in Rayong province. The final four projects, under brand Britania, will be worth Bt6 billion, Peerapong said.

Combined with current projects, this year’s launches will boost presales to Bt28 billion, up 1.8 per cent from last year’s presales at Bt27.5 billion. Last year exceeded early estimates of Bt24 billion in presales by 14.58 per cent. The combined projects will boost total revenues to Bt19 billion by year-end, exceeding last year’s results, he said.

In the first nine months of last year, the company recorded Bt10.69 billion in total revenue and net profit of Bt2.39 billion, despite early estimates of achieving total revenue of Bt16 billion last year.

“We have continued confidence that the property market for this year will continue growth compared to last year. Although demand from foreign buyers will drop, the real demand in the domestic market is still growing, Peerapong said.

He added that the Bank of Thailand’s measure to tighten criteria for loans for second and third homes would not affect its business, because these are “real demand” from buyers. Recurring income for the company will be generated through the launch of two hotels to open this year, noted Kamonwan Wipulakorn, chief executive officer of One Origin Co Ltd, the recurring business arm under the Origin umbrella.

Five previously announced hotels are being built at a fast pace, most notably Staybridge Suites Bangkok, Thonglor and Holiday Inn & Suites, Sriracha. Both hotels are expected to commence operations in the fourth quarter, and begin generating recurring income, he said.

Meanwhile, the company plans to launch two new 2019 projects – a hotel in Bangkok and a mixed-use project in Rayong – worth about Bt2 billion. The latter will enjoy high demand from the development of U-Tapao Airport and Smart Park in Map Ta Phut, which will be a new centre of the Eastern Economic Corridor, said Kamonwan.

Their move responds to an oversupply in the condominium market as purchase demand signed a drop in both local and foreign investors after a new measure to restrict approval of mortgage loans takes effect on April 1 this year.

That the baht remains strong over than USD and Yuan is also directly affecting investors from Mainland China, with a drop already showing this year compared to last year, say property experts.

“We revised our business model to focus on single detached houses and townhouses when we saw strong demand in this market segment,” LPN Development Plc’s chief executive and managing director, Opas Sripayak, said in a recent interview with The Nation. “The demand to buy condominiums both local and foreign investors, especially from the China mainland, was signed to drop in the second half of last year till now.”

Opas added that domestic investment demand had also signed to drop since the Bank of Thailand announced its latest measure to increase loan values for people who buy second and third homes to 80 per cent and 70 per cent. This will directly impact demand by investors and speculators, who cover about 20 per cent of total condominium market value.

Also adding to the demand drop is the latest measure from China’s government to restrict capital outflow from the country. It aims to reduce the investment from its citizens to other countries to not over US$50,000, or about Bt1.5 million, as China’s economy faces negative impacts from the trade war with the US that has continued into this year.

This impacts directly on the condominium market, which recorded demand above 20 per cent from Chinese investors from 2017 till now, he said.

“We have Chinese investors who bought about 300 units in our condominium projects from 2017 till 2018, with half of the units already transferred and the remaining 150 units to transfer this year,” said Opas.

“We have wait and see if they will transfer or not, when the baht is now stronger than USD and Yuan currency. This may be impact on their decision to complete the transfer, when Chinese investors are now reducing their investments overseas following China’s economic slowdown,” he said.

Prasert Taedullayasatit, honorary chairman of Thai Condominium Association, said the 2018 property market recorded a total sales value worth Bt512.17 billion, up 18 per cent from the year 2017, for all 121,193 units combined. That Bt512.17 billion included Bt293.72 billion from condominium projects, up 19 per cent from 2017 and spread over 70,066 units. Next was Bt122.58 billion from single detached houses, up 22 per cent from 2017, was spread over 18,601 units. The remaining Bt87.57 billion from townhouses, up 13 per cent from 2017, for a combined 30,914 units.

“Most of condominium projects sold last year included sales of up to 20 per cent sale to Chinese investors, which includes both the individual investors, and the brokers and agencies who bought more condominium units than they could sell to individual investors on the China mainland,” he said.

Following strong demand for condominium projects in the past year, which set national records for both sales value and the number of units, market demand this year may slow due to the measures by the Bank of Thailand and from measures by the China government to control capital outflow due to a minor domestic growth slowdown due to the trade war.

Meanwhile, low-rise residential – townhouses and single detached house – is where the real demand is within the domestic market, leading most property firms to revise their business model to focus on it, says Prasert, who also chief executive officer for the premium market at Pruksa Real Estate Plc.

Following the market trend, Pruksa Real Estate also had to revise its business model to find a new market to drive its business growth this year, he said.

“For our premium market, we had to select the location and also design the products to match specific demand in the market. This year will be a hard period for property developers, but we continue to have confidence the market will maintain to nearly last year’s [level],” Prasert said.

According to a survey by Lumpini Wisdom Co Ltd, a research firm under LPN Development Plc, the number of condominiums ready for sales to Chinese investors in 2018 totalled 5,000 units in Bangkok and suburbs. They were worth about Bt25 billion. All are to be transferred to their customers in 2019 through 2020.

According to a survey by Collier International, Bangkok and suburbs had a condo inventory of 30,993 units worth a combined Bt274.73 billion as of 2018 year end.

Land and Houses Plc’s chairman of the board of directors, Naporn Sunthornchitcharoen, said at a recent press conference that the company revised its business model to focus on low-rise residential projects this year, when they saw the demand for condominiums was going to drop.

This year, the company plans to start a further 16 projects with a total value of Bt26.96 billion, with 14 projects in and around Bangkok and two elsewhere in the country. All projects are either single detached houses, twin-houses, or townhouses.

Of the total sales for this year, 72 per cent are expected to come from single detached houses and twin-houses, 8 per cent from townhouses, and 20 per cent from condominiums, he said.

With regards to the Bank of Thailand’s (BOT) new measures to tighten credit underwriting standards for mortgages, Land and Houses has adopted a wait and see approach, Naporn added.