Prices of prime residential development land in Bangkok soared by more than 190 percent during the last two years – ranking the city at the top of Knight Frank Asia-Pacific’s first-ever Prime Asia Development Land Index, published today.
The report looked at prices of prime residential and commercial development land in 13 major cities across Asia between December, 2011, and December, 2013.
The land prices in the Index are derived using a repeat residual valuation methodology where Knight Frank looks at what a reasonable developer would be expected to pay for development land, given the gross development value of the potential scheme, costs (construction, professional, contingencies and financial), required profit, acquisition costs and relevant taxes.
Nicholas Holt, Head of Research for Asia-Pacific, said: “As the first-ever Index on development land prices of its size and scope, this will become an important resource for developers, investors, financers and policy makers.
“A key observation from our findings points to the fact that in developing Asia we are seeing low liquidity and rapid land price appreciation, whilst in developed Asia such as Hong Kong, Singapore and Tokyo, we see the highest land prices and redevelopment opportunities.
“In these mature markets, the lack of prime development land has led to more emphasis on redevelopment opportunities, while given the higher cost of land and in some cases high holding taxes, there is often more pressure to develop quickly.”
For each of the 13 markets, a number of prime sites have been selected for the exercise. These are existing sites within the prime districts of the market including recently transacted land plot or a plot that is currently on the market, however most importantly these sites accurately represent the prime development market for each sector.
The research showed that in the two years from December 2011, 24 of the 26 markets tracked (13 residential and 13 office) saw an increase in their indices, reflecting increasing prime land prices amid tight supply and strong demand.
Southeast Asian markets saw the fastest price growth for prime development land. Bangkok, Jakarta, Kuala Lumpur and Phnom Penh make up four of the top five cities in terms of price growth, while the mature markets of Hong Kong, Singapore and Tokyo saw the lowest price growth.
Looking at the outlook for Bangkok, the report noted: “The number of new launches of condominium projects in prime Bangkok CBD areas will continue to decrease due to the scarcity of suitable freehold development land, as evidenced by the 20 percent decline in unit launch numbers between 2012 and 2013.
“Notwithstanding, prime land prices are expected to continue to rise to more than THB500,000 per sqm within the next two years. As a result, commercial constructors will continue to seek out alternative development zones in order to avoid competing with residential developers for land acquisitions, at more affordable levels that make office and retail development viable.”
Story: DD Property
Photo: Coconuts Bangkok
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