Tourism creates new Opportunities for Developers!
For several years Thailand has been an attractive proposition for foreign investors. Real estate prices are still low in comparison to other countries whilst rental yields remain reasonably high. This in conjunction with the fact that the purchase of property is relatively straightforward, deposits are low and transfer fees are kept to a minimum makes Thailand an even more appealing proposition for investors.
In the past, we have seen the majority of foreign investors coming from places such as Japan, Hong Kong and Singapore with little interest coming from mainland China. Weak domestic demand has led to Thai developers exploring other avenues overseas and the resulting marketing campaigns have seen a dramatic increase in the number of Chinese investors buying condominiums in places such as Pattaya, Phuket and of course the capital Bangkok.
China’s main search engine, Baidu ranks Thailand as 7th for countries in the world where Chinese investors searched for real estate and an impressive second behind Malaysia for countries in South East Asia. There is little surprise that Malaysia ranks so highly due to their strong economic and political relationship with China. Indeed, over the last decade developers in the country have conducted successful marketing campaigns to encourage investment such as giving property investors the right to apply for a residential permit.
If we were to refer back to the statistics collated by Baidu, it appears that around 50% of Chinese capital invested in Thailand was for investment purposes. The results appear to suggest that budget is also a factor with the majority of Chinese investors favouring properties that are valued below THB10 million. Popular areas are Bangkok, close to BTS or MRT stations, Phuket, Pattaya and the northern city of Chiang Mai.
It appears that further comparisons can be drawn between Malaysia and Thailand. Bangkok and Phuket are currently the destinations of choice for investors in Thailand whilst Kuala Lumpur and Penang are the perennial favourites in Malaysia. Phuket and Penang are costal destinations and Bangkok and Kuala Lumpur are both capitals with excellent infrastructure and amenities – a clear attraction for Chinese and foreign investors.
The Thai property market is certainly in its infancy with Chinese investors when compared to the well-established Malaysian market. This however gives developers excellent scope for growth and the popularity of the country with Chinese tourists only adds to this. The current potential for Thailand appears to be far greater than that of Malaysia and there are more opportunities for developers to maximise growth.
The current rules regarding foreign ownership of property in Thailand are fairly transparent when it comes to condominiums with foreigners collectively allowed to own in freehold, up to 49% of the total saleable area of the condominium. This is far more attractive than what is offered in other neighbouring countries.
Nationally, the level of foreign ownership of condominiums in Thailand is thought to be between 10 and 15% meaning there is a great deal of scope for growth. Again, compare this to Malaysia, where foreign ownership is thought to be in the region of 30%, Thailand becomes even more attractive.
With the ever-increasing number of tourists coming to Thailand the foreign property investment market is receiving an even greater boost thanks, in a large part, to the heightened exposure it is receiving. We have already established that Thailand is a popular choice for Chinese investors and the fact that currently 30% of Thailand’s tourists come from China, the potential for growth in foreign property investors coming from China is enormous.
Attracting foreign investment in the first place is obviously vital but developers need to forge ways to attract further investment long-term. Property standards have improved dramatically over the last decade in response to greater international competition as too has customer service. Laws regarding financial transactions, taxation and transfers are also transparent which will help gain the trust of overseas investors which in turn is likely to breed customer loyalty leading to greater growth. If these trends continue the future looks extremely bright.