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Bangkok

UP-Market rental sector thriving

Developing a small housing estate for well-heeled expats could be a promising investment option


Spectrum, Bangkok Post / 17 April 2011 -There are a lot of houses offered for rent in Bangkok, but many do not meet expatriates' requirements. While most of the properties on the market are detached houses or located on large housing estates, many expats prefer residences situated in exclusive compounds that offer greater privacy and assurance of security.
 
The supply of purpose-built rental houses in Bangkok remains limited and fails to accommodate strong demand from expats. This is good news for individuals who already own land that they do not want to sell or lease on a long-term basis. They may consider developing a small rental housing estate as an investment option.
 
A number of existing housing estates have been developed to cater to expats. They are located in residential areas across the city, both central and suburban.
 
One of the largest such estates is L&H Villa Sathorn by Land and Houses Plc. Operated by Centre Point, L&H Villa is situated in a prime central business location on Narathiwat Ratchanakharin Road, near Sathon Road. The estate features 37 luxury houses, with rental rates ranging from 180,000 to 230,000 baht per month.
 
Most of the other rental developments are smaller estates owned and operated by individuals. For example, Ban Sukhumvit 18 on Sukhumvit 18 offers seven houses with rentals ranging from 250,000 to 280,000 baht per month. There also a number of small estates located on Sukhumvit 36 such as Ban San Sabai with eight units renting for 170,000 to 180,000 baht per month, and Garden Village with 11 units and rentals ranging between 220,000 and 240,000 baht.
All of these estates are leasing very well and enjoy full occupancy.
 
EXPATS' PREFERENCES
 
Based on the steady inquiries that Jones Lang LaSalle receives from expats seeking rental houses in Bangkok, interest is concentrated in small housing compounds with six to seven units, for houses with 400 to 500 square metres of usable space. Top requirements include good security, estate management, house maintenance service, gardening, and swimming pool maintenance.
 
The rentals these expats consider affordable range between 180,000 and 300,000 baht. Rental rates are determined by the location, house and land sizes, furnishings, and provision of a private garden and a swimming pool.
 
Interestingly, the difference between the monthly rental rates per square metre of rental houses and those for luxury apartments or condominiums may be minimal. There is no conclusion whether a house or an apartment of a similar size and rental offers a better value for money as the preference of the residential type depends very much on the occupier's lifestyle. However, Jones Lang LaSalle has seen increasing demand from expats for rental houses in recent years.
Most expats who opt to rent a house have families and prefer a residence that provides exclusivity, is set in a natural environment, allows pets, and offers a private garden with an area for outdoor socialising.
 
Stand-alone detached houses are less popular among expats as there is a greater concern over security.
 
In addition, some houses in larger housing estates are rented out by individual owners. These units, if well located, designed, and furnished, can attract some expats. However, when compared to purpose-built rental houses in small compounds, others may find houses in larger estates less attractive as they are generally less exclusive and tend to lack a single estate manager.
 
INVESTMENT OPPORTUNITY
 
As we mentioned at the outset, developing a small rental housing estate could be an interesting investment option, particularly for those who already own land that they do not want to sell or lease.
 
The development process is relatively straightforward. This type of housing estate can be developed on land plots starting in size as small as 1,200 square metres. Discounting the value of the land, developing this type of compound requires a small investment and short construction time relative to apartments or other high-density accommodation.
 
Operating is also less complex than for condos or apartments and payback can be made more quickly. In addition, maintenance and renovation are less costly and easier to undertake. There are cases in which houses more than 20 years old are still leasing quickly as they were well built and have been well maintained. In addition, purpose-built rental houses typically generate stable income streams as the minimum lease term is usually two years compared to one year for condominiums or apartments.
 
However, investors looking to develop purpose-built rental houses must have a clear understanding of the profiles, requirements and preferences of their target tenants such as sizing, location, designs of the compound and houses, and the minimum facilities and services to be provided.

About the author
 
Naporn Tansakul is the head of residential sales and leasing at Jones Lang LaSalle. Readers may contact her for advice by email at inquiry.residential@ap.jll.com or visit www.joneslanglasalle.co.th.