Page 107 - _21-0619 OK

The International Journal of the Royal Society of Thailand
Volume XII, 2020

value of land transactions reported by the Government Housing Bank's Real
Estate Information Centre and listings of reference prices published by the
Treasury Department. The implied price of private land in 2018, averaged over all

locations and categories of land use, can be obtained by dividing the estimated
value (34.5 trillion Baht) by area (128.6 million rai) in Table 3 further below.
The resulting figure is 270,000 Baht per rai or approximately 22,000 US dollars
per acre. This figure is however subject to a considerable measure of uncertainty.

Prices of farm land and 'built' land

The main difficulty in estimating the value of land across any large area,
for example a province, let alone the whole country, is that land prices are highly
variable and extremely dependent on location. Growth of trade, industry, services
and demand for housing has expanded the area of urban and peri-urban land and
pushed the commercial values of city center plots to new heights, periodically
reported in the press. Rents increase markedly with infrastructure investments
and intensive property development in specific areas. Leverage with bank credit
increases the return to investors. When financial institutions and trusts join in,
the price per square meter of land around urban centers reaches a level at which
high-rise development is the only profitable, or most profitable, solution.
The transition to high-rise, visible in Bangkok in the 1980s and early 1990s,
has since started to make an appearance in other major cities.

Given the degree of uncertainty about future rents and the importance
of anticipation, the price/rent ratio for land is similar to the price/earnings ratio
for stocks, reflecting investor sentiment as much as or more than returns today.
The potential for future gain from real estate development often leads investors
to retain land for long periods of time without much concern about present use

so long as they do not incur heavy tax charges. In and around cities it is common
to find large areas of undeveloped land waiting for public investment in
infrastructure and amenities that will increase rents and create demand at prices
in line with the landowner's long-term expectation. A further reason for patchy
development is the presence of areas of urban and peri-urban land reserved by
state agencies. Such areas in and around most provincial cities further reduce
the availability of land for commercial and residential use and contribute to
scarcity and high prices of private land near the city center.

99
Francis Cripps

5/1/2565 BE 09:03
_21-0619(085-112)6.indd 99
_21-0619(085-112)6.indd 99 5/1/2565 BE 09:03