A Look at Thailand’s Real Estate Market

Despite of the recent political turmoil ( spring 2010) that hit Bangkok recently, a lot of buyers are still showing interest on buying a condominium unit in the downtown area for personal use, or to just purchase as an investment so they would have something to be sold or to be rented out in order to generate income in future, that could lead to healthy income returns.

Most property consultants in Thailand would advice that purchasing a condominium unit right now is considered as the safest investment buy in the Thai market for foreigners. In the light of the political and economic uncertainties that are happening in Thailand right now, most interest rates are falling down as well as the stock market is having a downturn and so as the yields of government bonds are gradually falling down. Foreign investors who are interested to own condominiums in Thailand are allowed to buy freehold condominium units, provided that the building most not exceed 49% of the foreign ownership ratio of the condominium, and that the purchase of the property must be paid with cash.

According to the 2007 survey conducted regarding the condition of Bangkok's financial market, the total stock of existing condominiums in the downtown area is 48,128 units as of the first quarter of 2007, it increased to 9.53% or about 4,188 units. In terms of the area, 21.4% are in the Central Business Districts, 44% are in Central Lumping, 34.6% in Sukumvit, 8.2% Pathumwan and 29.6% are in the Riverside.

The luxury and high-end market is the best investment option, according to the survey since there will be limited supply in the future. In 2005, there were 1,788 newly launched units located at the luxury and high end areas. Furthermore, there were 1,097 newly launched units during the year of 2006, representing a significant increase of about 38.6%. It is also expected that in 2007, there will be the same number of new and luxury high-end condominium launches as there were during the year 2006.
According to Aliwassa Pathnadabutr, managing director of CBRE Thailand, the luxury and high-end condominium units in the downtown Bangkok area have been attracting a big amount of interest from long term investors. Despite that the market has recently slowed down, due to the instability of political and economic situation.

However, during the past few years, long term investors who made profits from reselling or earning through the monthly rental fees of their condominium units, have remained keen on purchasing condominium properties around Bangkok area because of their understanding and they are confident with the market. Base on their experience, they were satisfied with the returns of their investment in the form of capital appreciation as well as rental yields of 5% up to 7%, which is way higher compared to the current deposit account interest rate of 3.5%.

If you take a look at the situation, the picture is not at all rosy. Investors in both the luxury and high-end markets are not only concerned on their finances, but they also lack confidence in their market due to the negative factors in the political scene and the economy and even on the society itself.

The middle end of the market is dominated mostly by Thai buyers and investors. This was proven through the success of several projects like Villa Ratchewi by TCC Capital Land, as well as the Life Rachada-LadPrao by Asian Property Development. However, some property consultants said that the large number of new condominium launching in the middle to the low end of the market may lead to an oversupply at some stage. During the year 2005, there were 2,688 newly launched condominiums positioned at the middle to the lower end of the market and are located in the downtown area of Bangkok. There are about 7,630 newly launched units in the downtown area of Bangkok during the year 2006, representing an increase if 184%. During the first quarter in 2007 only, there are about 1367 newly launched units that were announced.
The middle end of the market is actually running the risk of oversupply, while the luxury segment appears to be the investor's best bet.

Property consultants, have forecasted that there will be limited supply of luxury and high-end condominium units in the market, while the demand for residential condominiums for long term investment will continue to remain strong, particularly those projects that are located in the Central Business District or along the mass transit routes.

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