Will buyers ever tire of the Land of Smiles?
Despite its roots Down Under, the description could just as easily be applied to Thailand: a nation whose spectacular natural attributes, incredible cuisine and long-established cache as one of the world’s most appealing places to live has enabled its property market to ride out storms and setbacks that might have floored those in other countries.
“Thailand’s infrastructure, accessibility, and general reputation for being a laid-back leisure destination are still vastly superior to other neighbouring countries,” says Andrew Gulbrandson, research head at JLL Thailand. “While certain destinations within Thailand may become less popular, it’s difficult to envision a scenario where Thailand’s desirability as a place to invest substantially decreases.”
Indeed, the country’s reputation for being Teflon-coated when it comes to deflecting troublesome news, events and economic tidings is as resonant as ever. In August 2016, bombs exploded in the tourist hubs of Hua Hin and Phuket while last October saw the passing of King Bhumibol Adulyadej, the nation’s much revered monarch.
This year has, by Thai standards at least, been relatively light on potentially seismic events. However, the military-run government, in power since a coup in 2014, preside over an economy that continues to be lacklustre. The economy will expand 3.3 percent a year on average from 2017 to 2019, according to the World Bank, the weakest among eight developing Southeast Asian nations.
Given all this you could be forgiven for thinking that the country’s once-thriving real estate sector might be showing signs of lethargy, if not out and out fatigue. Not so, say analysts, experts and developers, pointing to booming demand for luxury property in the capital Bangkok and healthy interest from investors, both foreign and Thai, in popular secondary markets such as the paradise islands of Phuket and Koh Samui and the well-located beach resort of Hua Hin.
In Bangkok, growth in the condominium market remained strong last year. According to Knight Frank’s “Asia Pacific Residential Review”, published earlier this year, more than 52,000 new units were added in 2016 bringing the total to 435,805. But with demand at 315,393 units, the take-up rate recorded a three percentage-point drop to 72.4 percent.
Contrastingly, take-up in the sub-prime and prime segments increased by more than four percentage points to 75.4 percent – indicative of the current rude health of the luxury residential market in the city.
High-end condominiums are rising with the regularity of a ticking metronome. The striking MahaNakhon building – a mixed-use tower (Thailand’s tallest tower) that features leading international restaurants, hospitality and a luxury residential component with management by Ritz-Carlton – is the most noticeable manifestation of the ongoing penchant for new high-end real estate, while other new projects vie for the attention of super-rich investors. Prime central areas in the city are rising in price with properties selling for up to THB300,000 (USD8,421) per sq metre.
At super-luxe residential projects, such as the Ritz-Carlton Residences at MahaNakhon and 98 Wireless by respected Thai developer Sansiri, price tags are truly eye-watering. Units at the Ritz-Carlton Residences are priced from THB45 million to more than THB300 million while prices average about THB550,000 per square metre at 98 Wireless. Still, these asking prices pale in comparison with the city-record THB650,000 per square metre that was paid in March for the penthouse unit at Mandarin Oriental Bangkok Residences, winner of Best Condo Development at the Thailand Property Awards 2016.
Such opulence may not come cheap but strong uptake from buyers proves that there’s a market for it.
“Freehold ownership of Thailand’s tallest tower is truly a unique selling point,” says Kipsan Beck, managing director of MahaNakhon. “Buyers have indicated that they appreciate the design and specifications, mixed-use lifestyle benefits of having everything at their doorstep and the wide range of facilities and quality standards throughout.”
“Investors eyeing the luxury condo market should not expect any rental yield from new projects,” says Gulbrandson. “Prices for new luxury units have risen to the point where it does not make sense for renters.”
The absence of any significant buy-to-let benefits (at least at the highest end of the markets) could be looked upon as a disincentive to buyers. So too could the surge in land values. These factors, as well as an expected glut of supply in the condominium market, meanwhile, has prompted some – including, most recently, Supachai Panitchpakdi, a former director-general of the World Trade Organization – to speculate about a possible property bubble.
Experts, however, point to a range of advantages which bolster Bangkok’s reputation as a safe and stable place to invest.
Notably, the city still offers decent value for money. According to globalpropertyguide.com, property prices in the world’s top real estate markets like the US, UK and other Asian hotspots like Singapore and Hong Kong are between two to six times more expensive than Thailand.
Analysts also point to the absence of punitive stamp duties for foreign nationals such as those found in Singapore and Hong Kong and the liquidity of developers and the selectivity of banks in approving mortgages as positive indicators. And, of course, also appealing are the perks that come from living in a city with myriad lifestyle benefits and easy access to the rest of Thailand and the world.
“Any suggestion of a bubble falls somewhere on the spectrum between ill-informed and irresponsible,” says Gulbrandson. “Bubbles can be created by many conditions, but most notably loose financing and massive speculative development, neither of which are present in the Bangkok market.”
While Bangkok is by far the liveliest market in the country, sector conditions elsewhere in the tropical nation are also looking more promising than they have done for a while.
The sector in Phuket is beginning to pick up momentum after a soft few years where various ructions including the collapse of the Russian rouble, the worldwide slump in oil prices and the fallout from the UK’s Brexit vote took their toll on investor confidence.
Agents, however, are reporting an uptick in interest – especially in the resale market. And while there’s scant scope for new projects on the built up prime strip of coastline on the west of Thailand’s biggest island, inland areas such as Pasak and Kathu and quieter coastal enclaves such as Rawai in the south of the island are developing fast.
Observers note a strong Thai flavour to the resurgence of the Phuket market, with home-grown developers and investors taking up the slack as interest from international buyers dwindles for the moment.
“The positive response from the local market has been pleasantly surprising,” says Setthapol Boottho, executive director of MontAzure, whose Twinpalms Residences and Estates at MontAzure near Kamala beach are among the most exclusive of the new developments on the island.
The THB2.2 billion project, which is part of the larger mixed-use MontAzure development, comprises and condo and villas on one of the final plots of land on the island with direct beachfront access.
“Thai buyers are far more discerning now in terms of design, quality and yield,” he adds. “Many more experienced Thai investors realise the value of having a balanced property portfolio so they are looking further afield for better returns and capital appreciation.”
The high-end segment on Thailand’s star island is also expected to be boosted by the recent extension to its international airport, which increased capacity from 6.5 million to 12.5 million passengers a year.
“The airport facility itself will be a vast improvement on the customer experience which is important in the luxury segment,” Setthapol says. “It also means that more destinations are accessible which should broaden the market across all segments – high end and mass market. These markets co-exist in many celebrated destinations like Hawaii, and Bali, where there are a variety of locations with different segment appeal.”
Over on the east coast of the country, in popular destinations like Koh Samui and Hua Hin, investment opportunities also abound.
Although complaints of overdevelopment in certain areas of Samui, as well as an oversupply in poorly-constructed developments, are founded, agents are reporting generous yields of between 6 to 14 percent on luxury property. The emergence of Lamai, the island’s second-largest resort area, and the fact that there is still plentiful room for quality new projects are among other factors fuelling optimism.
“If certain development plans around the island do end up being confirmed and put into place then huge changes could be seen in specific areas with many new investment opportunities,” says George Willoughby of Form Realty.
Despite a slight slowdown over the past few quarters, the market in Hua Hin remains relatively stable.
According to Knight Frank Thailand research, the total supply at Q1 2017 stands at 23,584 units, with no new projects being launched yet in 2017. Approximately 1,000 to 3,000 new units were launched over the past few years, but the research notes that future supply will grow at a slower rate, especially in the luxury segments as premium real estate in the coastal town becomes scarce.
The sector there is expected to expand, however, in the next three to four years thanks to the government’s plan to develop a high-speed rail connection from Bangkok to Hua Hin.
Further encouragement to the real estate market nationwide came in March 2017 when Apisak Tantivorawong, minister of finance, said that the government was considering amending property legislation to allow investors to lease property for 50 years, with the option of renewing the contract for a further 49. Under present regulations, businesses are permitted to take out 30-year leases with the option of extending for another 30 years.
“That would be a real game-changer,” says Robert Krupica of leading Thai international law firm Hughes Krupica. “Foreign villa buyers would benefit immensely from the longer tenure and the longer lease terms will be very positive for mixed use and commercial developments where the asset can be amortised over a longer period.”
To those unfamiliar with Thailand, its paradoxes may seem disquieting. However, with value for money, high quality developments continuing to enhance the sky-high appeal of its property market, it’s hardly surprising that the nation continues to ride out its storms.
Chiang Mai continues to struggle
Thailand’s second-largest city has long been considered a poor relation to Bangkok and southern markets like Phuket when it comes to investment in real estate. And condo and housing supply in the northern capital remain weak despite new transport network development projects such as a second international airport and a 184-kilometre inter-city motorway between Chiang Mai and Chiang Rai. According to the Real Estate Information Centre (REIC), the monthly absorption rate of the low-rise housing supply in the city declined to an average of 3.6 percent in the third quarter of 2015, down from 5.3 percent. Samma Kitsin, director general of the REIC, says the ambitious transport plans will have minimal impact on the property market as the projects are unlikely to be completed in the near-distant future.
Phuket’s inland appeal
Although its beachfront areas are undoubtedly Phuket’s hottest investment hubs, urban zones inland such as Phuket Town and Kathu District are increasingly on the radar for developers and investors. While beachfront property is undoubtedly attractive, it comes at a premium. Buyers can expect to shell out up to THB110,000 per sqm for some high-end condos on the island’s most prized stretches of shoreline. Prices per sqm are around half that inland, while improving road links to the airport and a host of new retail options further enhance the appeal of areas such as Kathu. “We are seeing a lot of activity in Kathu District presently and that’s liable to be an ongoing trend due to the opening of new retail options such as Blue Pearl and the King Power duty free complex,” says Robert Krupica of Hughes Krupica.Source: http://www.property-report.com/detail/-/blogs/thailand-real-estate-relentless-expensive-and-highly-desira-13