Nestled at the heart of Southeast Asia, Thailand has become a business hub attracting a huge number of multinational companies setting up office and operations in the country. Its highly strategic location made it a buffer zone, making it the only region not colonized by any Western country. For this reason, a number of foreign nationals are thinking of engaging in property investment in Thailand.
Its proximity to the frontier markets of Cambodia, Vietnam, Myanmar, and Laos placed Thailand in an economic advantage. This gives the country quick access to cheap labor and more than 200 million consumers. This does not mean that Thailand is entirely reliable to its neighbours. Thailand has a robust economic status, particularly in the export market.
Thailand Economic Status
In the past four decades, Thailand emerged from being a low-income country to become one of the widely known development success stories. Most of this success comes from its sustained economic growth and notable poverty reduction in the 1980s. From 1960 to 1996, Thailand’s posted an annual growth rate of 7.5% and 5% after the Asian Financial Crisis. After a slowdown from 2005 to 2015, the country is slowly traversing the path to recovery by posting a growth rate of 4.1% in 2018.
A forecast by the Asian Development Bank (ADB) expects Thailand’s GDP per capita to increase by 3.5% in 2019 and by 3.3% in 2020. The Asian Development Outlook forecasts the country’s GDP to grow by 3.9% in 2019 and 3.7% in 2020.
Thailand has an economic freedom rating of 68.3, increasing by 1.2 points as a result of improved ranking for business freedom, government integrity, and property rights. In the Asia-Pacific region, the country ranks 10th in economic freedom. It has an overall score above the regional and world averages.
The only downside to investing in Thailand is the increased corruption in the country. Out of the 175 countries, Thailand ranks 99 in the least corrupt nation according to the 2018 Corruption Perceptions Index by Transparency International.
Liveability in Thailand
In the latest survey by ECA International, Thailand is a livable country for most East Asian expats. Bangkok placed 89th in the rankings as the country continues to improve its infrastructure, particularly transportation. In the Economist Intelligence Unit (EIU) Global Liveability Index, Thailand ranks 98th, with an overall rating of 66 out of 100. It has the third-best ranking for countries in Southeast Asia.
Cost of living in Thailand has exponentially increased along with the influx of expats living in and tourists visiting the country. The UN World Tourism Organisation (UNWTO) reported that in 2017, Thailand ranked as the 10th most visited country in the world with more than 35.4 million visitors. By 2032, Thailand expects to receive over 100 million tourists.
Expats are looking at retiring in Thailand for the country’s quality of life ranking. Bangkok’s ranking was 133rd of 230 according to 2019 Quality of Living survey by Mercer.
Property Investment in Thailand
With all these positive changes in Thailand amidst political tensions, property investment in the country is perceived to still be profitable.
Thailand’s real estate market will face tons of changes as a result of stricter mortgage regulations, policy rates, and new land and property taxes in 2020 according to CBRE’s Real Estate Market Outlook 2019.
Single-detached houses have average prices rising by 3.1% from the first quarter of the year. Asking prices for condominiums are now at THB 250,000 per square metre. Most developers choose to sell the properties at discounted prices just to clear their inventory amidst the oversupply of condominium properties in the country. Developers are also looking at promoting unique selling points for these properties such as rental management schemes, home automation, and mixed-use developments.
Property Market Trends in Thailand
Most of the growth is seen low-rise properties such as townhomes, posting an increase of 6.5% in the same period. This is the highest year-on-year increase in four years. This is due to many developers’ decision to delay condominium launching to compensate for the demand for low-rise residential properties.
Land price index also appreciated by 2.2% year-on-year in the first quarter of the year. Apartments located in upscale neighbourhoods of Bangkok have rental yields averaging 5.0%. Properties in the Sukhumvit area have a rental rate of 1,373 whilst those in the Silom-Sathorn area have rates of 552.
In the past two to three years, Thailand is seeing a growth in the co-working space trend, which pushes occupancy rates in the Patumwan, Siam, Sukhumvit, Silom, and Sathorn areas. In 2018, approximately 28,151 square metre of co-working spaces were made available to the market according to the research by Colliers International. It is expected to grow to 113,280 square metres this year. The growing demand and limited supply have increased rental rates in the said areas.
CHG Recommendation: Thailand Properties Are Still a Worthy Investment
Foreigners cannot own land in Thailand. They can, however, invest in two ways: through a 30-year leasehold or buying it through a limited company. Due to legal restrictions, many foreigners choose to buy an apartment or condominium in the country. Foreigners can buy a condo property under their name as long as 51% of the building remains owned by Thai locals.
CHG recommends foreigners to take advantage of the current discounted rates of condominiums, particularly those located in the Sukhumvit area. A report from Knight Frank showed that these condominium projects have decreasing prices of as much as 6% year-on-year. Developers having take-up rates of only 55%. It is a great opportunity to get into the market as builders aim to lower their stocks.
Bangkok is not the only city affected by this. Across the country, close to 500,000 units were unsold. However, experts are still positive about the country’s property market. Some real estate agents see a growing demand from foreign investors despite these setbacks. Knight Frank also believes this challenges and falling prices are all short-lived basing from the country’s tested resilience. The presence of planned infrastructure projects that will cement Thailand as among the top developing countries in the region.