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Changing Expat Profile Presents Challenges

16 Nov 2016

Bangkok’s downtown residential rental market is driven by demand from expatriate tenants. There is a shift in the profile of Bangkok’s expatriate population, with Chinese citizens taking a greater share of a community once dominated by North American, European and Japanese nationals. This presents challenges for a sector that has long enjoyed stable occupancy and rental rates.

Over the past quarter-century, expatriates have generally preferred to live in a few Bangkok districts, principally Sukhumvit, Lumphini and Sathorn. The Sukhumvit area remains the most popular, owing to its convenient access to the BTS Skytrain, complemented by the variety of restaurants, shops and international schools. Its appeal is visible from the continuing eastward expansion of the expatriate community beyond Ekkamai to Phra Khanong and Onnut, along the existing BTS route.

Residential rental demand comes from expatriates working in Thailand who rent, rather than purchase, and are normally here for only 2 to 3 years. There is only a very small downtown rental market for Thai nationals. All expatriate employees in Thailand need work permits and while the overall number of work permits has remained broadly stable over the past year. Chinese citizens now account for 13.3% of the total number issued nationally, representing a year-on-year increase of 19.4%.

In the early 1990s, almost only Western expatriates had housing allowances of more than THB 40,000 per month. One of the main changes over past 16 years has been more Japanese nationals coming to Thailand with families, requiring two- and three-bedroom apartments and condominiums and receiving housing allowances not dissimilar to Western expatriates.

Japanese nationals used to account for over 25% of the expatriate working population in Thailand, which is now down to 22.8% as of Q3 2016.

The number of Japanese expatriates appears to have stopped growing in line with the slowdown in Foreign Direct Investment (FDI), whereas the number of Chinese expatriate employees has doubled over the last five years, becoming the second largest expatriate nationality.

Whilst Japanese expatriates’ choice of location, unit size and budget were not dissimilar to Western expatriates, the requirements of Chinese nationals are generally subject to more limited accommodation budgets, with price acting as the principal consideration and location preferences concentrated in areas outside of the traditional expatriate residential districts. Some commentators have named Ratchadapisek as Bangkok’s new ‘China Town’ due to the influx of Chinese expatriates in this area.

Bangkok rental demand for expatriate standard apartment and condominium rental units remains steady, with the overall occupancy rate standing at over 90% for apartments, and with well-managed condominium buildings continuing to perform well.

Although overall expatriate numbers may grow, there is likely to be limited growth in demand from Western and Japanese expatriates, the traditional tenants for Bangkok’s downtown apartments and condominiums.

Residential landlords in the downtown area of Bangkok should consider taking steps to enhance competitiveness by renovating aging stock and improving property management.

The apartment sector, comprising multi-let residential buildings held under single ownership, will be better placed to respond in the short-term, due to the simplicity of undertaking building improvements and in making timely management decisions, both of which will be key to sustaining rents and retaining tenants.

Condominium owners will both need to get committees to maintain and improve common areas and also focus on the interior decoration and furniture of their units. Condominium interiors, just like hotel rooms, need regular upgrades and improvements to attract tenants.

An article written by James Pitchon, Head of Research & Consulting, CBRE Thailand for Bangkok Post dated 16 November 2016.