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.
Topics covered in this article:
- Thailand’s Property Market in Previous Years
- Pattaya’s Property Market
- Bangkok’s Property Market
- Chiang Mai’s Property Market
- How will Thailand’s property market perform in 2020?
- Are there any other positive aspects of investing in Thai property?
- New Property Projects in Bangkok
- Thailand’s Demographic Issues
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.
Pattaya’s Property Market
Pattaya’s real estate market crashed a few years ago and hasn’t fully recovered.
There was a constant decline in the number of new condominium units, decreasing from over 10,000 new units in the second half of 2012 to only around 1,000 new units in the second half of 2017. Still, prices increase by 3% to 5% a year, which is not too bad.
Having said that, Pattaya has faced issues with an oversupply of property in 2019 and the market has been on low flame. One thing is certain: Foreigners and expats have a big impact on Thailand’s property market.
Some cities, like Pattaya and Phuket, are more vulnerable to the economic climate in countries like China and Russia, compared to Hua Hin and Bangkok, which attracts wealthy Thai investors.
Bangkok’s Property Market
Even if the demand has shrunk in Bangkok the past couple of years, we’ve seen an increased number of condominiums. Below you can find data, giving you a better understanding about Bangkok’s property market:
- The number of newly launched condominiums has increased from 8,000 to more than 15,000 per quarter in 2017 and 2018
- In 2009, the number of condominiums was less than 100,000 in Bangkok. By 2019, the number reached around 553,900 condominiums
- The average price of condominiums has doubled from 2004 – 2018, from around THB 60,000 to THB 120,000 per square meter
- The number of serviced apartments was less than 500 in Bangkok in 2001. In 2018, there were over 21,000 serviced apartments, this number will reach 25,000 by the end of 2021
Even with a sharp increase of residential units, including condominiums and serviced apartments, prices are rising due to the high demand, at least in Bangkok.
According to a report covering the condominium market in Bangkok by Knight Frank, the asking prices have declined a little in the CBD and neighboring areas, while prices have increased sharply in suburban areas.
Looking at the market performance at the start of 2019, we saw surprisingly low sales volumes of condos due to tightened lending policies, a strong Thai Baht, and a weak economy.
Chiang Mai’s Property Market
Despite having problems with smog and being one of the most polluted cities in Asia from time to time, Chiang Mai has risen and become increasingly popular among property buyers.
Having said that, it’s significantly smaller than the capital and mainly a hub for digital nomads, retirees, tourism, and some manufacturing operations. You’ll find cheaper property here, but not as high yields.
According to Juwai, Bangkok and Chiang Mai are the most popular destinations for Chinese retirees.
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.
That said, the capital is still promising for long-term investments as there’s much investment planned in its transportation systems. New BTS lines will be built in fringe areas in the coming years and make the city expand.
Developers invest heavily in areas close to these upcoming BTS lines. China’s One-Belt-One-Road initiative (OBOR) will make Bangkok even more interesting, connecting the city with Kunming and other important cities in the region.
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, and especially Bangkok, as attractive spots to buy property
There are many new mega-projects planned that will affect Thailand, especially Bangkok, 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. Almost 25% of the buyers in the upscale areas of Bangkok are foreigners
New Property Projects in Bangkok
There are hundreds of new condominium and apartment projects under construction in major cities, with many located in Bangkok.
You can find most of these projects along the new BTS lines that are currently under construction, and expected to be completed soon.
As mentioned, Thailand plans to build several mega projects to uplift its infrastructure. This is well-known among international developers that flood the market to build condominium units close to the new infrastructure.
These areas offer great potential for price increases in the future. There’s a high demand for serviced-apartments, with around 60% of these apartments located in the Upper and Lower areas of Sukhumvit.
Thailand’s Demographic Issues
Thailand faces challenges due to demographic issues. It’s ranked number 3 globally in terms of the fastest-shrinking working age population.
Vietnam, on the other hand, has a population that will increase from around 95 million to 120 million until 2040, and 50% of the population is below 30 years old. We see a similar trend in the Philippines.
So far, the demographic issues have been negated due to the increased number of foreign investors. One thing is certain: expats and other foreigners have helped to keep the market above the surface.
Thailand’s property market has been weak in 2019 and will most likely follow a similar path in 2020. The government has introduced tightened lending policies as of 2019, which affected the real estate market almost instantly.
The market fell with double digits over several months. At the same time, developers struggle with much excess inventory, yet this will turn Bangkok into a buyer’s market as these companies will be forced to reduce prices.
As mentioned, the strong Thai Baht is also affecting the property market negatively as foreign retirees and investors find cheaper property in other neighboring countries.
That said, keep in mind that the market performs differently depending on property types and locations. The luxury segment with properties located in the central areas continue to attract a vast number of foreigners.
Low and medium-priced properties in the suburban areas, that are mainly built to cater to Thai buyers, has seen a greater oversupply.