Thailand Residential – Interest From Abroad Foreign Buyers Still Keen
While foreign demand in Bangkok has cooled for the moment, international purchasers in Pattaya and Chiang Mai remain active
With the prolonged political turmoil, foreign demand for Bangkok property is expected to remain weak. But for major tourist destinations including Pattaya and Chiang Mai, buying activities among Russians and Asians in the condo market are still bustling.
Aliwassa Pathnadabutr, managing director of the property services firm CBRE Thailand, said residential purchasers and property investors in Pattaya were still in good shape. CBRE is selling about 50% of its Pattaya luxury properties to Thais and 50% to foreigners.
“Russians make up the majority of foreign buyers, but we are seeing growing interest from Germans,” she said.
The Bang Lamung land office reports Russians own the most condo units in Pattaya among foreigners, followed by the Chinese and Germans.
Russians and Chinese prefer unit prices of 1-2 million baht, while Germans’ budget was more than 2 million baht a unit, said Anupol Komkai, head of the office’s registration division.
“Indians have emerged as the big movers now, progressing from just a tourist market,” he added.
In Chiang Mai, Asian buyers are gradually influencing the property market. In the first quarter, the top five foreign buyers were Singaporean (45%), Chinese (30%), Malaysian (12%), Taiwanese (8%) and American (5%), said Matthew Lin, director of the Chiang Mai-based property developer Summit Global Developments.
“As the China market opens up, we will be targeting this group for the rest of the year to sell out our remaining stock,” he said.
Mr Lin, a Singaporean investor who has settled in Chiang Mai, said it was gradually dawning on overseas investors that every few years Thailand experiences some political uncertainty.
“As long as the protests do not affect the economy significantly, they will return to the market,” he said. Some savvy investors see this as an opportunity to expand their property portfolios as there are many great bargains up for grabs now, which could increase in value significantly after the crisis is over.
To attract more foreign property buyers, Mr Lin suggested openness and consistent foreign investment rules. Unlike Malaysia and Singapore, which constantly revise rules on taxes on foreign property purchases, Thailand’s laws on real estate purchases have remained consistent, he said.
The formation of the Asean Economic Community (AEC) at the end of 2015 may also affect Thailand’s property scene because the country has the geographical advantage of having the most shared borders among Asean members.
Even though no one knows when a functioning Thai government will be formed, Singaporean and Chinese investors remain keenly interested in Thai property.
“We have hosted a number of Singaporean, Malaysian and Chinese private equity and investment groups here in Chiang Mai over the past few months and are in the advanced stages of negotiation,” said Mr Lin.
In Phuket, Ms Aliwassa of CBRE said foreign demand had remained subdued since the 2008 global financial crisis. Demand has shifted from villas to smaller condo units, which have been active among Asian buyers.
In Bangkok, the top three foreign buyers of individual residential properties are from Singapore, Hong Kong and Taiwan. The political protests have reduced foreign demand in the capital, she added.
“There has been a slowdown in sales of new projects and resales of existing projects in the Bangkok downtown luxury market. Despite fewer transactions, prices for the best properties continued to rise,” said Ms Aliwassa.
Magnolia International Corporation, a property developer owned by the Chearavanont family which controls the Charoen Pokphand conglomerate, experienced noticeably slower sales at its luxury condominium.
“We are confident Thailand has so much potential to offer and our sales will surely resume once this situation is resolved,” said the company’s managing director Thanawan Chaiwatana.
He said a majority of buyers were mature investors accustomed to Thailand’s economic and political ups and downs, a fact they accept when considering purchases in the country.
Sales of Magnolias Ratchadamri Boulevard near the Ratchaprasong intersection are at 70%. The major foreign buyers are from Hong Kong and elsewhere in Asia.
Last year the company’s roadshows in Hong Kong and Singapore drew large crowds. It plans to continue with more roadshows but wants to schedule them when Thailand is not having protests.
“The political situation definitely affected investor confidence, but with the forthcoming economic integration under the AEC, Bangkok is strategically placed to be the hub of Asia. This makes it an incredibly valuable opportunity for investors,” said Mr Thanawan.
Some Asian countries have applied stricter regulations on property purchases to curb speculation, which could make Thai property more attractive.
Pace Development Plc, another luxury developer, agreed foreign demand was affected by unfavourable sentiment. Both local and international buyers took longer from first enquiry to making a reservation.
Sorapoj Techakraisri, Pace’s chief executive, said that earlier this year some foreign buyers were reluctant to fly to Thailand.
“International purchasers spending more than 40 million baht for a home tend to be fairly familiar with Thai politics, and so are perhaps less susceptible to following mass market sentiment,” he said.
“But a stable Thai political system would certainly be a welcome development.”
The top two foreign buyers at Pace’s MahaNakhon luxury condominium are from Hong Kong and Singapore. The rest were European, British, Japanese, Australian and Emirati.
Mr Sorapoj insisted there was a lot of pent-up international demand for Thai property, while local residents were seeking high-end freehold property.
“Once we reform and move forward, this pent-up demand will increase sales velocity even further,” he said.
Mr Sorapoj said the weak baht was helping Thai properties tap foreign demand. Several foreign buyers have transferred large portions of payments to take advantage of the currency.
Most foreign customers saw the weak baht as a temporary blip for a strengthening Thai economy, encouraging property purchases, he said.
“The time needed to continue with our political development is frustrating, but every country grows in fits and starts, even the US and the UK,” he said.
The world economy is in a more positive position than five years ago, but there are some negative indicators. The property market in neighbouring coun-tries is slowing, causing a slight ripple effect in Thailand, he said. The slowdown in the Singaporean and Chinese property markets has led some other local developers to delay their deci-sions to launch, said Mr Sorapoj.
Ms Aliwassa said individual residential investors from Singapore, Hong Kong and China were looking at alternatives because their governments have imposed strict cooling measures on their domestic property markets such as a special stamp duty and restrictions on mortgages.
Large investors still see potential in the Thai market for a range of different sectors, including residential condominiums, offices, hotels and retail centres.
“We have already seen Singaporean and Japanese investors take the plunge in Thailand,” she added.
A recent joint venture between Magnolia Quality Development Corporation (MQDC) and Greenland Group shows foreign investors believe in the long-term potential of the Thai property market and that developers need to expand beyond their domestic markets.
MQDC is another property business owned by the Chearavanont family. The Greenland Group is one of China’s largest property developers.
Source | Bangkok Post 21 May 2014