Chinese Buyers Drawn to Thailand
Megatrends driving Chinese demand
Capital controls at home and appealing prices in Bangkok are drawing high levels of real estate investment to Thailand.
The number one factor of Chinese property buying in Thailand is the results of outside stimulants and this element is often overlooked. Bangkok-based market observers sometimes overrate the importance of local conditions to Chinese demand.
Chinese buyers are drawn to Thailand on local factors such as prices, yields and the value of the baht and it’s fluctuations. However, these local factors have become much less important than the large number of Chinese families who desire inviting overseas real estate, now and in the years to come. Chinese acquisitions of Bangkok condominiums are always present and significant, however may not increase regularly every quarter.
A key factor that drives Chinese property purchase in Bangkok is that there is a growing wealth of Chinese consumers and few enticing investment opportunities in their home market. The second factor is Beijing’s program of capital control.
Although China’s economy is no longer growing 10% or higher, their growth rate is still achieving more the 6% per year. This is twice the percentage that is prevailing in the US, a country China will pass in GDP size this decade. China has already become the world’s biggest exporter and largest manufacture and has the future ability to grow further with four times the US population.
There are 3.5 million US-dollar millionaires in Mainland China according to investment bank Credit Suisse. In addition, there are many more “upper middle class” consumers in this market. The latter generally usually cannot afford to buy property in more expensive markets such as US and Australia. With Bangkok starting prices below US$150,000 this middle class market can afford to invest in Thailand.
In the past six years China’s wealth per adult has more than quadrupled. For every one-dollar the typical Chinese adult possessed in 2013, they have four dollars.
The trust in real estate more than any other assets is accounting for the Chinese real estate buying.
Only low interest rates are offered at Chinese banks. In 2018 the Shanghai Composite Index was the world’s worst performer due to the volatility and immaturity of the Chinese equity markets. New government rules make it difficult to invest in Chinese real estate. In addition many alternative Chinese investments such as private equity funds and peer-to-peer lending have disintegrated due to poor management, fraud and government crackdowns.
Chinese have put 53% of their wealth into real estate as other attractive investment opportunities. Residential property was named Chinese overseas investors favorite asset class.
All this indicates that the Chinese investor market is large, growing fast and wealthy enough to generate a large demand for Bangkok condos for many years to come.
More than any other single factor capital controls are the key reason Chinese investors choose Bangkok and other Thai markets instead of cities in other countries. The movement of money out of the country has always been regulated by Beijing but violations have been overlooked. Since December 2016 the authorities began stiffer enforcement.
These capital controls have lead Chinese buyers from more expensive markets such as Australia to Thailand and other less expensive markets.
When large sums of money became harder to move Chinese buyer inquiries for Thai properties have surged. The worldwide share of Chinese inquiries about Thai property went from 5% in 2016 to more than 13% in 2017 and will be higher for 2018.
Capital controls, growing Chinese wealth and the lack of other investment opportunities have pushed Chinese buyers towards Bangkok real estate.
Thai developers and agents must find effective ways to work with Chinese buyers to take advantage of these upward trends. Those that do should be able to receive a significant share of their foreign buyer quota from this market for many years.