Expert says key to success will lie in assembling large, mixed lots to offer all at one time

Property auctions have proved one of the best ways of selling real estate during an economic down­turn, and though private property auct­ions are not a common way of selling real estate in Thailand, two realtors say the success of auctions is a positive sign in the market.

According to Mel Giller of Mel Giller International Ltd, auctions were very appealing to buyers and it was likely that they would become a common way of selling property in Thailand.

Mr. Giller, who pioneered real-estate auctions in the United States 26 years ago, has organised several property auctions here over the past two years.

"People think auctions are a flash in the pan, just something that comes and goes. but they don't. It's and alternative way to sell real estate," he said.

James Pitchon, executive director of CB Richard Ellis agreed, saying that to date most condominium auctions havebeen very successful, both in terms of the number of units sold. totalling over 1,000, and the prices achieved.

Prices obtained at auctions have been higher than what some analysts had initially expected because demand was coming from end-users and not investors, he said.

However, Mr Pitchon foresees only limited potential for more auctions of downtown residential condominiums because many of the units have already been sold. CB Richard Ellis sees prices for certain residential buildings actu­ally increasing simply because there is a shortage of units for sale.

"If you are looking to purchase there is not much choice among the best properties, and overall there is a signifi­cant rise in occupancy rates," Mr Pitchon said.

The next wave of property auctions is emerging from the Legal Execution De­partment. At its first auction at Queen Sirikit National Convention Centre on Sept 1-2, a total of 693 properties went under the hammer. Almost half were sold.

"The fact that the Legal Execution Department was able to sell almost half of its properties, I think, is significant and provides optimism to the market, demonstrating the ability to clear this stock of distressed properties," he said.

Mr Giller said that if there were no negative aspects to a property then an auction is often the key to a quick sale.

" The important factor of an auction is that we can always promise a client that we can sell his property on a given date, we guarantee a day of sale. No­body else in the business can do that," he said.

However both real estate experts ag­reed that auctions held in Thailand were mostly on big scales and individ­ual property owners who would like to have their real estate auctioned would not be able to get it done.

Mr Giller said that during auctions of several units in a single condominium building, the client pays a lot of money to stage the event. In this case it is unlikely that the client would want an outsider to intrude.

Mr Pitchon said the cost of organis­ing an auction for a single property was not cost - effective. It does not make sense to rent a hotel room for the sake of selling a single property.

"At the moment auctioneers are not assembling that many mixed lots where properties are coming from various vendors," he said.

However, Mr Giller is moving to change the trend, he is planning a forum of major real estate agents at which he will propose that they take advantage of the auction service to sell their properties.

"If we can collect a lot of properties from various agents then we can do it all at one time," he said.

He is also going to contact lawyers and accountants who might have cli­ents who need to have their non-performing assets converted into li­quidity.

"so instead of waiting until he can find a buyer, an auction will always find a buyer at a certain date," Mr Giller said.

A sales technique dating back to Bib- lical times is being used to spur Thailand's  property   markets, where prices remain among the lowest in Asia.

Auctions especially ones run by an American company, are helping to fill offices,   apartments   and   condo -miniums, which have remained vacant since the country was plunged into an economic crisis three years ago.

" Auction is the universal language, it's the international language, it's the oldest marketing system known to human   civilization and dates back 2,500 years, according to the Old Testa­ment," said Mel Giller, an American whose company has auctioned off real estate around the world.

More than 500 properties have gone on the block, reducing the glut which sent prices tumbling.

Anant Asavabhokhin, who heads the country's largest property firm Land and Houses Plc, said property prices in Thailand are the lowest in the region, along with Indonesia.

The Philippines, Malaysia and Singa­pore are in the next tier while the highest prices in Asia are found in Japan, Hong Kong and South Korea.

A visual reminder of the sector's poor health is the hundreds of office blocks  and   condominiums   which remain unoccupied and a Bangkok sky­line filled with half- completed build -ings.

The economic crisis, which quickly spread to other Asian countries, was in part caused by vast, unsecured loans to property developers who engaged in a building frenzy.

Many projects were ill - conceived and contributed to a great oversupply in the market.

Now, with some hopeful signs on the horizon, the public and private sectors are  providing   incentives  to both developers and buyers.

The government has approved sig­nificant tax breaks for property firms and  individuals with mortgage pay­ments, while companies are offering fancy web sites, big discounts, special promotions and the auctions.

Anant believes prices will begin to climb in the near future as buyers look for bargains

Buyers realize that new real estate developments will come with a higher price tag.

Also helping boost sales are interest rates which dropped from 15% when the crisis hit to as low as 6% today

The auctions, which began last year and picked up momentum in 2000, are also proving effective and other auct­ioneers   besides Giller's group have entered the game.

Giller, whose company has auc­tioned off over US$1.4 billion-worth of real estate worldwide, said that it would take many years   to reduce the huge inventory on the Thai market using the traditional method of individuals trying to sell their own property.

"Every time we come into a dis­tressed market, and we have been doing it for 25 years, we sell. We just took 500 properties off the market here in 12 months," he said in an interview.

Another property - related headache also faces Thailand. What to do with unfinished buildings which are deteriorating by the day?

A municipal survey last year showed that construction work had stopped on 364 buildings in the capital.

The survey was taken in response to public concern   over safety of these structures and the occupation of some by squatters and criminal elements.

Without a sharp economic uplift and a much heated up demand, experts fear some of these hulking structures will have to be demolished.

If the buildings were completed they would add   a staggering 1.1 million square metres of office space to an already oversupplied market.