14 Jul Foreign Investment Opportunities for Thailand’s Condominium Property Market
Before the economic crisis in 1997, Thailand’s economic development was considered a continuous success with an average economic growth rate of nearly 8% per year from 1960-1996. Despite the world recession of the mid-1980s, Thailand’s economy grew at double-digit rates during 1988-1990 and by over 8 percent per year from 1991-1995.
Fast forward to today and Thailand’s economic outlook is again strong with three years of average 3% growth. A strong performing Thai baht has managed to hold its value whilst incrementally creeping upwards.
With its geographically central location and position as one of the biggest and most dynamic economies in Southeast Asia, Thailand remains a hot property for foreign investment, but how do foreign investors view Thailand’s property market?
One key area of foreign investment is in the condominium market, only Thai citizens are allowed to own land but when it comes to condominiums 49% of the units are allowed to be foreign owned. So, in a building with 100 units, for example, 49 of them are actively marketed towards foreign buyers.
Higher quality, less space
The capital of Thailand, Bangkok, usually sets the trend for other cities around Thailand to follow and in recent years the major development projects have been luxury condos that provide opulent surroundings and luxury facilities but little in the way of space. Bangkok’s CBD (central business district) main streets like Sukhumwit and Silom and other arteries west of the river and in the northern suburbs all have this in common.
The small living space is cancelled out by a huge common area, rooftop pool with panoramic skyline vistas, gym and sports facilities along with private buggies and vans to nearby transport links. These luxury units cost on average 300,000 Thai baht per square meter but are drawing huge interest from overseas investors, in 2016 condominiums sold out their 49% allowance for foreigners before the end of the year.
James Pitchon, executive director of research and consulting at CBRE (Thailand), a property advisory group, said high-income homeowners are increasingly moving from large suburban mansions to condominiums and apartments in central Bangkok.
“Bangkok has become a more inward-looking city, where we have now a greater concentration of facilities and attractions in the city centre,” he told the Nikkei Asian Review. “So the best hospitals, the best restaurants, the best shopping centers are downtown, and many of the younger generation work in the downtown area.
This may be down to that fact that, by living in the center of Bangkok, residents inoculate themselves from issues that developing nations face, as Bangkok’s city centre is very modern and convenient. The central areas of Ploen Chit and Chid Lom are bisected by Wireless Road, popular with many embassies and financial companies. Last year Sansiri, one of Thailand’s largest property groups, sold half of its units in a $246m project on Wireless Road before it had even launched. Prices for most of the 77 apartments ranged from $2m to $8.5m.
Local developers will seek external partners
Thailand ranks third in the region for ease of doing business, behind Singapore and Malaysia, but unlike Singapore there are no punitive stamp duties for foreign buyers. Local banks are also cautious to lend, with many projects needing 50% of units to be sold prior to a loan agreement allowing construction to start. This situation has created a favourable environment for increased activity from overseas investors and a clear catalyst for greater inbound investment in the Thai property market over the year.
Developers will continue to explore overseas sales opportunities, building on the success of projects actively marketed internationally in 2016, with units priced below 10 million Thai baht proving popular among international buyers, such as the Sansiri development on Wireless Road
Major real estate projects
Bangkok has successfully built a reputation as a major food destination, with food playing a huge part at community and entertainment areas across the city. This serves to create an experience that cannot be replicated online and so increases the land value of the area around these locations.
The Chao Phraya Promenade is one such project that will likely result in another burst of condominium developments around the new area. At least three condominium projects worth 10 billion Thai baht are in the pipeline to help feed this development and they will all hope to sell out their 49% allowance for foreign owners.