15 Jul Five Key Factors Influencing the Property Market in Thailand in 2017
Thailand’s economy is poised for modest growth in 2017 as solid domestic spending is expected to help confidence return for investors and consumers alike.
This will have a big impact on the property market as much of the domestic spending has been earmarked for major infrastructure projects.
Here are five of the key factors we believe will influence the property market in 2017.
1) Public investment
Public investment is expected to remain one of the key drivers of GDP growth in 2017, particularly in major transport infrastructure. Nine projects worth 488.3 billion Thai baht are to start construction this year. “Sufficient transportation infrastructure is vital to putting Thailand on a higher growth trajectory,” said Usara Wilaipich, senior economist for Thailand at Standard Chartered Bank in Bangkok. This level of public investment will likely spur confidence for private investors as well as boosting the value of land already privately owned and so increasing the possibility for development.
Some of the major transport infrastructure projects are for cross-country rail lines and motorways which will increase the value of the land that they travel through. The rail lines are expected to link with Laos and Cambodia and possibly create new towns around the station areas that will involve private capital and public financing intermingling to ensure the viability of the project.
2) Transport to make Thailand regional hub
Megaprojects that will enhance the country’s position as a regional hub will likely increase the value of the country’s real estate. New MRT lines connecting suburbs and newer areas to the city will help to encourage a decentralization of investment and will likely see new industrial parks and associated property popping up in areas of the city that are currently cheap to buy into. The disparity in rental returns and land value between the CBD and other central areas of Bangkok and the greater Bangkok area is currently quite high, expect that to drop in the next five to ten years as these outer areas become more interconnected and developed.
3) Tech startups and Thailand 4.0
To help modernize the economy, the government has earmarked 28 billion Thai baht of investment for 2017-21 in four digital areas: commerce, entrepreneurship, innovation and content. Next year, Thailand’s first technological innovation park is scheduled to open in Chonburi province, southeast of Bangkok.
The 10 billion Thai baht project will promote Thai tech startups and hopes to attract global tech companies to invest in data servers and research and development as a hub for the Association of Southeast Asian Nations (ASEAN) member countries.
This type of dynamic investment and public promotion of new technology offerings makes Bangkok attractive as an center of operations for tech companies in the region, as well as companies that are unrelated to tech but benefit from its innovations.
4) Head of the emerging markets
By 2025 Price Waterhouse Coopers (PWC) estimates that 60% of all construction will take place in emerging markets. This dynamic is creating powerful new real estate players and if Thailand can keep its position as a regional hub Thai companies will come out on top of these players. Combined with the transport links detailed above Bangkok can position itself as the door to the AEC and ASEAN, which would be the 6th largest economy in the world if it were one country.
5) Cities, not countries will drive growth and diversification
As more and more people move into Thailand’s cities looking for work real estate’s role in providing interaction between people becomes more important. A combination of cheap labour and a rising middle class creates opportunities for investors and developers. The collective spending power of these groups can allow developers leverage when it comes to finding investors for a development. Whilst While Thailand does have many rural areas that are attractive when it comes to finding people to actually live in a unit, the only opportunities outside of the city are by the beach and these typically don’t have great ROI for individual private investors nor the same decent track record that the well known developers in Bangkok or Phuket have.
Appetite for residential land in Bangkok has recently increased dramatically, with prices up 18% year-on-year in the first half of 2014, according to Knight Frank. Condominium development is seen as the most profitable use of land in the city and represented most of the land transactions in Bangkok during the year.