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Thailand’s Real Estate Market & Economic Growth 2017

Thailand’s Real Estate Market & Economic Growth 2017

As we enter Q4 of 2017 is becomes evident that the country has once again enjoyed a sustained period of economic growth with predictions being that the growth rate will match that of 2016 at around 3.2%. Whilst this may not be too earth shattering, it should be taken into context with other countries in the region, many have achieved far lower rates whilst others have actually experienced negative growth.

Some research conducted by CBRE earlier in the year points to some of the market trends that we should expect for 2017 and it appears that many of these predictions have proved to be very accurate.

Factors That Pose a Threat to the Thai Economy

Towards the start of the year, one of the biggest threats to the Thai economy was thought to come from US protectionist trade policies aimed mainly at China. The fear was that lower Chinese exports would lead to the country importing fewer raw materials and manufactured products from Thailand. However, this was not a severe as had been feared when President Trump was inaugurated and the impact has been far less than feared.

Increased Foreign Investment

As predicted, many domestic and local developers continued with their existing plans although there was increased interest from international developers, particularly in Bangkok, with developers looking to enter the potentially very lucrative property market in Thailand. A lot of this can be attributed to cautious domestic bank lending that in turn created a favourable environment for overseas investors. This created the perfect scenario for greater inbound investment.

Prime Locations Are Still Highly Sort After

Prime locations are still highly sort after by all the major developers. This is the case in the Central Business District of Bangkok and in resort cities such as Pattaya and Phuket where many of the large hotel management companies are looking to purchase land in prime locations for new resorts. With land in finite supply, this will inevitably drive up the price of land in these locations.

Domestic Buyers Become More Fussy Therefore Developers Look At Increased Marketing Overseas.

High-end properties have always been in high demand. In Bangkok, most of this demand, around 85% comes from Thai buyers, whereas in some of the popular resorts, the demand is coming from foreign investors.

The resort cities are seeing a massive influx of Chinese tourists, many of whom are becoming investors, looking to buy mid-range properties either for their own personal use or for investment purposes. Rental guarantee concepts are proving to be popular with all parties. In addition, many developers are actively promoting their projects overseas. Once again, evidence points to demand for properties under THB10 million, being central to their campaigns. There is also no punitive stamp duties for international buyers – something prominent in markets such as Singapore and Hong Kong.

Investment Properties

Demand for investment properties is also on the increase with typical yields outstripping those from other investments. Developers are also recognising the benefits of offering these types of investment to buyers. Many tour operators are demanding these types of property and the fact that many come complete with hotel licences, meaning that they can be rented for periods of less than 30 days, once again makes them even more appealing. There has been notable shift is the demographics of the tourists coming to Thailand with the vast majority now coming from other parts of Asia.

Growth in CLMV Region and E-Commerce Bode Well for Logistics Sector

Thanks to Thailand’s central geographical location in the CLMV region, researchers believe that Thailand has tremendous potential to become the regional logistics hub. With the deep sea port at Laem Chabang, easy to access airports and an ever improving rail and road network, it would appear that there is huge potential for a rapid growth in GDP rates.

E-commerce is also increasing in popularity in the country and it is believed that this will create greater demand for logistics space, in turn creating more demand for residential properties. Online retailers typically require three times the physical space of a conventional retailer, due to greater product offerings, larger inventory and the need to facilitate reverse logistics, where customers return goods.

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Ben Harborne

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