Despite the current political turmoil, demand for prime central business district (CBD) land for investment remains robust, says CB Richard Ellis (CBRE).
The international property adviser does not expect political issues to hurt Bangkok CBD land prices, as there is a limited supply of freehold prime land in central Bangkok.
There are few willing sellers and most of the land is held by cash-rich owners who inherited family land. Land holding expenses are quite low because most land was not acquired through any debt financing.
There is virtually no land holding tax and no inheritance tax. This means that the majority of land owners have very little pressure to sell.
Transactions normally occur when potential sellers are sufficiently enticed with a record-breaking offer price.
In recent years, land prices have been driven upwards by developers buying sites to build condominiums for sale.
Condo developers have been able to outbid other property developers because of high development margins and quick project turnover.
Land investment in Bangkok's CBD has provided some of the highest investment returns, with year-on-year increases of about 15%.
This has enticed wealthy families to buy land and build income-producing developments despite low initial income yields because they are attracted to capital gains driven by land values.
Kulwadee Sawangsri, the head of investment and land services at CBRE Thailand, said the price for a prime site on the main Sukhumvit Road has risen by 480% since 2002 to 1.5 million baht a square wah, the highest percentage increase out of all of Bangkok's prime areas.
Next is the Silom/Sathon area with an increase of 400% to 1.4 million baht a sq wah, followed by the Phloenchit/Lumpini area with a gain of 320% to 1.5 million baht a sq wah.
Land prices have increased in suburban areas where construction of new mass transit lines has triggered demand for condo development in areas such as Rattanathibet along the future Purple Line.
Land prices in the Rattanathibet area have risen by 30-50% a year since the start of Purple Line construction.
CBRE predicts expansion of the mass transit system will have similar effects on land prices in other suburban areas.
Nonetheless, CBRE believes the centre of Bangkok will continue to be the most sought-after location for the best-quality offices, hotels, shopping centres and residences.
This means there will be continued demand in the future for the limited number of prime development sites in Bangkok's CBD.
"Prime CBD sites in Bangkok remain in high demand," said Ms Kulwadee.
"Presently, vendors are asking future prices for their land as there is no pressure to sell. I believe the land market will remain active this year if the vendors are willing to deal at current market prices."