In tomorrow's world, Bangkok will be a big 'Green' mango

The new masterplan for the capital includes a change to zoning regulations that will allow for the creation of new train lines, community malls and shopping centres

After months of expectation and speculation, Bangkok residents finally are able to view the new town plan. The city planning department put the new regulations into effect on May 16 after three drafts and public consultation sessions. The overview suggests it is an improvement on previous plans, with zoning adjustments in some areas to reflect the current population density.

CAPITAL IDEA: A model of the new metropolis on display at the Bangkok Metropolitan Administration’s city planning department. PHOTO: THITI WANNAMONTHA

The plan identifies its aim for Bangkok to be a "Green City", and also adjusts zoning to accommodate the expansion of train lines, community malls, shopping centres and the changing densities of residential areas. The suburbs, especially those close to the Outer Ring Road, will become centres, or sub-centres, of future expansion to reduce congestion in the city.

In recent years, land prices strongly correlate with town planning adjustments, due to the expectations of sellers and buyers, and the amount of supply in the market.

The most obvious example would be land prices along the mass transit rail lines over the past five years, where there has been extensive growth in the number of condominiums. The sales success and high absorption rates of these developments have motivated developers of all sizes to be more aggressive and more confident in raising their prices.

Land prices on Sukhumvit Road five years ago were between 62,500 and 75,000 baht per square metre. Today, the going rate is 350,000 baht.

Similarly, land prices in the sois off Sukhumvit have also increased. Plots on Sukhumvit 55 (Thong Lor), for example, fetched between 50,000 and 62,500 baht per sq m five years ago, while the current price is 250,000 to 300,000 baht.

This dramatic increase is not only evidenced along existing train lines, but also along planned future lines, where prices have more than doubled over the past three years to 37,500 baht per sq m.

Countering this trend are land prices in "waterway areas" where only slight increases have been recorded. Since the floods of 2011, the city planning department has designated certain areas as waterways in order to help reduce the impact of future floods.

The waterways designated to date are in the Klong Sam Wah, Min Buri, Taling Chan and Bang Khunthian areas. On Hathairat Road, in Klong Sam Wah district, land prices have increased just 13% over the past five years, from 2.2 million to 2.5 million baht per rai (1 rai = 1,600 sq m).

The high price of land drives developers to look more into developments involving leasehold structures, such as hotels, serviced apartments and community malls. The popularity and success of community mall projects has stimulated more long-lease transactions within the market.

The requirements for a successful community mall are a good location, a wide main-road frontage, and sizable land plots in accessible locations.

However, with freehold land prices around Bangkok the way they are, it is difficult to make community mall projects financially viable. The long-lease model, with leases up to 30 years and prices ranging from just 30-50% of those for freehold land, has become the solution for community mall developers.

This model also allows landlords to keep their land but also receive a lump-sum payment and annual payments.

We have seen many community malls that have been developed with extended leases in various locations, such as Rain Hill on Sukhumvit Road and The Circle on Ratchaphruek Road. The zoning changes in the plan that allow community mall development will definitely stimulate growth in lease transactions for land in those areas.

The other important regulation in the new town plan is road widths, which determine setback distances and building "envelopes" or areas. Previous drafts allowed the development of large buildings (10,000 sq m of floor space or more) if the road frontage was at least 10m wide. When authorities were thinking of increasing the width to at least 12m, land price speculation dropped and sellers were more willing to reduce asking prices.

The new plan also increases the area of usage, by further increasing setback distances for wider roads.

Previous drafts specified a setback of approximately 200m for all roads. For example, the area within 200m of Sukhumvit Road is zoned for commercial purposes, and the area farther than 200m is zoned high density for residential purposes.

The new plan takes the width of the road into consideration, so if the road is at least 12m wide, the setback has to be 200m. If the road is between 16m and 30m, the setback has to be 300m. This condition will bring about a difference in land prices according to the distance from a main road.

Another interesting matter is the cancellation of allowed usage of minor percentages of a plot of land in certain cases. In previous drafts, a developer could apply for a use other than the designated usage with a certain percentage of quotas: for instance, a commercial development in a low-density residential zone (yellow) was permitted, as long as the total usage did not exceed a quota of 10%.

The removal of this regulation will drive investors and developers to be more thorough in applying the new road-width clauses. For example, a low-density residential zone does not allow a hotel development that is more than 80 rooms, and only if the road width is 30m or more is the development of a hotel with up to 80 rooms allowed.

The changes to the town plan will directly affect land prices. Because of potential capital gains and development cost implications, investors should monitor and consider the changes before investing in property. If investors are in it for the long term, they might want to look at other factors such as infrastructure, population growth and the geography of the city.


Nukarn Suwatikul is associate director for investment services at Colliers International Thailand. She can be contacted by phone at 02-656-7000 or email nukarn.suwatikul@colliers.com

About the author

Writer: Nukarn Suwatikul