Property Insight > Strategy > The Altitude Of Real Estate Investments In A Foreign Shore

The Altitude Of Real Estate Investments In A Foreign Shore

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Investors from China have keen eyes to purchase in Thailand, seeing more buyers in forthcoming years

Predictions or outlooks derive from knowledge. Political and economic turmoil have caused miffing reactions among the property market players due to weak performances. Thailand’s overall statistics in real estate has not picked up the momentum in 2016. The kingdom’s weak economy also did not seem to offer any support in the short term.

Significantly, Thailand has experienced a gradual fall in demand for lower end, compared to the growth in interest for the high and luxury end favouring the investors and end users. There are proactive takes in the condominium market supply within the third quarter which showed the highest number of launches in over a year. As for commercial stands, Thailand has grown in niche for office spaces like serviced offices, mini-offices and homes offices. These are a hike in trend and choice for the new generation of working class.

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Cautious Outlook

Thailand is experiencing a languish side of the property market as they undertook a meagre 3.2% growth in the first quarter of 2016, setting as an underperformer as compared to most of its Asian counterparts. The weaker baht (THB) has perpetuated a low investor and consumer confidence level. Developers have positioned themselves well with projects in hand, but being cautious with a continued growth in 2017. Despite that, the effect in Bangkok for exorbitant projects will continue its robust sales with a take up rate of close to 75%.

Some of the factors which has led to these uncertainties in the market upheavals is the household debt which has resulted in Thailand being the highest consumer debt nation in all of Asia. Thailand’s household debt shot from 60% – 85% of national income in just over five years. Apart from that, its agricultural products maintained at a low price has caused a dwindling effect on the confidence of consumers purchasing powers, adversely causing the income to see a declining curve.

Premier Homes Real Estate Co., Ltd. managing director, Clayton Wade states “it is needless to say a slow recovery in the real estate sector has been made even more challenged with the passing of Thailand’s beloved King,”. The mourning period had left a sombre and uncertain air which has adversely caused a ripple in the sea of businesses including the real estate industry in Thailand.

Consequently, resort areas like Phuket, Hua Hin and Eastern Seaboard have been challenged with slow resale market and slower rental yields, especially from year 2015 till mid-2016. Even though, the supplies of new construction have increased, it took an overturn for the resort areas in Thailand with lower rental yield and competitive sales pricing.

Optimistic in Bangkok

Bangkok has an upscale momentum in its luxury property industry debunked with 300,000THB per square meter being the starting price for luxury condominiums, and 350,000THB per square meter, especially at Bangkok’s latest “Ultra Luxury” landmark named Icon Siam, Mandarin Oriental Residence.

Meanwhile, another ultra-luxury market project with Sansiri’s planned 98 Wireless, the city’s most expensive condominium buildings with price tags averaging 550,000THB per square meter. The rental yield in Bangkok is considered one of the highest with an average of 5% according to the property pundits in Bangkok, uniquely in these high-priced areas seeking high yields for capital gains and rental yields.

Hot enclaves in Bangkok’s Thonglor area can easily fetch rental yields of 8% with capital gains over 10%, which is impressive compared with the country’s gloomy economy and real estate industry. The capital’s central business district yields an average of 7% around mid-low and high end market categories.

There are brighter plans for low and mid-level properties especially with Bangkok Sky train (BTS) and mass rapid transit (MRT) underground rail lines continuing to raise the bar as sales pick up strong, well into the coming years.

In Thailand, the demographic of buyers were domestic occupancies consisting of 80% of property purchases, especially in Bangkok while foreign buyers’ hailed from Hong Kong, Taiwan and Singapore, mostly being cash buyers.

Investors from China have keen eyes to purchase in Thailand and will see more of the buyers in forthcoming years. Thailand brokers were expectant, even the number of Chinese investors would surpass that of western countries like Russia.

Thai real estate is still admirably positive in outlook, despite the outlandish property trend affecting the country now. It continued to display growth year on year, across pretty much all sectors of the property market. CBDs located in Bangkok with MRT and BDS lines criss-crossing, has a sure bet for high rental yields and return of investments especially in Thonglor area.

Specifically, the condominiums have posted between 5% and 12% annual growth in pricing since the world economic crisis in year 2008. The luxury property market which is worth at around 10million THB (US30,000) and posed to be slow in movement, took a surprising turn by attracting foreign investments since 2013.

Thailand’s real estate sector is unregulated and at times not obeyed, therefore, it would pay to be a wise investor and to really understand the nook and crannies of the network and how it works within the country.

Resolution or Revelation

As an investor, it will be wiser to know around the locations, amenities, and accessibilities especially for rental properties. High demographic locations with high competition or restrictions may dampen the abilities to receive a suitable return in the investment.

Hence, foreigners are not allowed to own land in Thailand by law. For foreigners, those keen to invest were given options to either purchase through a limited company, or a 30-year leasehold can be arranged. Apartment lots can be owned if 51% are owned by a Thai citizen. Due to this legal restriction, foreigners can settle to purchase apartments or condominiums with more than half of it belonging to a local person.

In an overall outlook, Thailand is set to grow at a slower pace than most other nations in Southeast Asia due to the political and economical setbacks, even with the new King taking reign recently. It has underperformed with 3.2% growth in the first quarter of 2016, according to the Bureau of Trade and Economic Indices. The International Monetary Fund (IMF) forecasted that the Thai economy will expand by 3% in 2016, and by 3.2% in 2017. Thailand is looking forward to build it stance in the real estate sector to bracket a strong gross development value to improve its stand within the Asian economic landscape, and cement its name alongside its other Southeast Asia counterparts.

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