Why should you invest in Thailand?
Buying property overseas is one of the biggest investments many foreigners make. Before you buy assets in a developing market, you must do thorough research and understand what you can expect from the market in the coming years. Thailand is undoubtedly one of the most popular choices foreigners have when buying property overseas. In this article, I will explain what our predictions are for Thailand’s property market in 2020 and why you should invest in Thailand in 2020.
Thailand’s Property Market in Previous Years
Thailand’s property market has been in a slow but consistent upward trend for over a decade now. The main reason is the increasing number of foreigners that visit and live in Thailand. Around 88,000 foreigners applied for work permits in Q2 2018 in Bangkok alone and the number continues to rise. To put it in some context, in Q1 2015, 78,000 foreigners applied for work permits. That’s an increase of 10,000 expats per quarter, or 40,000 yearly.
A better economic outlook, higher take-up, and occupancy rates have resulted in this upward trend. Still, the market performance differs much between cities. For example, Bangkok and Chiang Mai have experienced higher growths, while places like Cha Am, Hua Hin, Khao Yai, and Pranburi have seen slower growth, or even stagnated.
In 2018 and 2019, the economy tumbled and we have seen a more volatile political climate. Added supply and tighter lending policies has cooled down the market. Around 65,000 new apartments were added to Bangkok in 2018, that’s an 11% increase compared to 2017, and the highest since 2009. At the same time, take-up rates have decreased to a mere 55% on average, while asking prices decreased 6% compared to 2017, according to Knight Frank.
How will Thailand’s property market perform in 2020?
With a weak economy and developers with much excess inventory, the residential real estate market is predicted to remain weak throughout 2020.
The Thai government introduced tighter lending policies with reduced LTV-ratios as of April 2019. Therefore, many analysts predict a slow down in the condo market in Bangkok. In Bangkok, the housing market fell as much as 13% during the first half of 2019, which is self-explanatory. The government issued a stimulus-package in the hundreds of billions of Thai Baht, to boost the local economy which is growing at a tame rate of around 3.5%. Yet, many believe that this will have little effect on the property market.
We see a decreasing number of Chinese buyers who cope with an ongoing trade war with the US and tightened capital controls. At the same time, the Thai Baht has been one of Asia’s best-performing currencies, leaving foreign retirees and investors with more inexpensive in other countries around Southeast Asia, such as the Philippines and Vietnam.
Thailand continues to be a popular investment destination among foreigners
Thai-property is still affordable compared to other countries in the region like Mainland China, Singapore, and Hong Kong. Buyers from these countries still see Thailand as attractive spots to buy property. There are many new mega-projects planned that will affect Thailand positively.
- Some examples are the EEC (Eastern Economic Corridor), China’s One Belt One Road project, several new metro lines, and other mass transportation projects. These projects will enhance the infrastructure, driving future growth
- The quality of new residential units in Thailand is above par, with well-known brands and international developers working in the Thai real estate market. Foreign partnerships with local developers continue to increase. Several Japanese developers, like Tokyo Tatemono Co., have entered the Thai market
- There’s a constant increase of foreign buyers and the government continues to introduce investment-friendly policies.
Why indeed should you invest in Thailand?
Located in the heart of South East Asia with a population of over 69 million people, Thailand is regarded as the second largest growing economic market and serves as a gateway connecting SEA to the rest of the world. Thailand’s capital Bangkok is the largest city in ASEAN with a population of more than 9 million. The GDP per Capita in Thailand was last recorded at USD 6,361 in 2018, which is equivalent to 50% of the world’s average.
Thailand ranked No.2 in ASEAN in terms of GDP in 2018 and has attracted huge sums of investment from countries such as China, Japan and Korea. With the influx of foreigners into Thailand property is one of the top choices to consider. We’ve listed down some of the reasons why you should invest in Thailand’s real estate.
Known as “the Spain of the East”, Thailand has always been one of the most popular spots for holiday makers and investors. Its capacity to attract tourists isn’t limited to the appeal of its stunning beaches, vibrant lifestyle and unlimited shopping choices. The charm of Thailand’s beautiful destinations continuously attracts tourists to Bangkok, Phuket, Chiang Mai, Pattaya and other beautiful cities and tropical destinations, making it a significantly beneficial investor hotspot for investors to sell and rent real estate in Thailand.
The Thailand real estate market is expected to grow by 6 to 8 percent. The government plans to further enhance the transportation infrastructure (Mass Rapid Transit for both BTS Skytrain and MRT Subway) in Bangkok and notwithstanding a USD 45 Billion investment to develop the Eastern Economic Corridor. This is in time with the recent increase in the influx of foreign investors entering Bangkok and Pattaya, especially from China.
Property prices & capital appreciation
Generally, properties in China, Singapore and Hong Kong are higher in cost as compared to the Real estate in Thailand. Thailand’s property market also ranks as one of Asia’s most popular amongst Chinese investors. According to recent data from the online Chinese real estate portal Juwai.com, Thailand was the most popular country in the world when it comes to inquiries from potential real estate buyers in 2018 — climbing up from the sixth spot in 2016. Thailand was the fourth-most-popular country for real estate investment with $2.3 billion coming in from Chinese sources.
As a result of high property demand, prices on islands such as Pattaya, Phuket or Hua Hin have gone up. Property prices have even doubled in certain areas of downtown Bangkok like Ratchathewi and Thonglor since 2013.
Friendlier Thailand law
Thailand is friendly towards foreign investments, unlike most countries where foreigners may be required to pay additional property tax. In terms of taxes and fees, the buyer acquisition cost for off the plan is only at 1% of the property price – ie transfer fees, Juristic fees (ie one year of the maintenance fee in advance), Management fee and sinking fund with no foreign stamp duty or legal fees involved. Recent contracts are written in both Thai and English.
Besides the attractive tax structure for foreign buyers, it is relatively easy for property owners to sell their Thai home. You can sell to anyone be it a local or a foreigner, there is no restriction and no seller stamp duty or any minimum investment period, which is another reason why so many foreign investors favour Thailand in comparison to investing in traditional markets such as London, Australia or Singapore, where there are often additional foreign stamp duty, taxes, and fees to purchase or sell a property. This competitive tax structure coupled with the comparatively low entry price point makes it attractive for foreigners to enter the Thai property market. Hence this made Thailand become one of the top choices amongst real estate investors worldwide.