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Property Market in Thailand Weathering Financial Storm

Jun 18, 2008
Thailand's markets have experienced a slowdown in recent months ... however, the result is not as negative as it might seem. Many Asian economies have seen enormous growth and are expected to see a matching fall in their economies, with property developers being hard hit. However the slower growth in the Thailand property sector makes it seem that the market can weather the current financial storm, and makes condos in Thailand actually stable longer term investments.

Obviously, one of the biggest factors in the outlook for Asian markets is the current credit crunch in the US. This is one of the biggest factors globally. Economies have been changed worldwide, and ultimately property values have been damaged. Some regions have obviously done worse than others, or experienced the net effect sooner. Asian property seemed to be relatively unaffected last year, with rental and capital growth exceeding expectations in many cities. The amount of investment increased, and some markets are expected to continue strong throughout this year as well as last. However, some of these economies that bucked the global trend of slowdowns in last year are now expected to see a bubble bursting. Thailand is different.

Bangkok's 2007 performance went contrary to Asian markets in neighboring countries - growth was quite subdued, and demand grew only slightly. This is widely recognized to be due to political instability, and the cost of living rising in the area due to the price of oil and the weakened US economy. However, these factors are not as negative as they seem! If we look to the current volatility in the Chinese market, we will see why Thailand's lack of breakneck growth compared to other Asian countries actually makes a condo in Thailand one of the better investment choices in Asia today. Rapid growth has forced the Chinese government to introduce drastic measures to slow down the economy - and these are having a huge effect on property prices and prospects for the country. The market is see-sawing crazily, and in the short term is quite unpredictable. By contrast, the property sector in Thailand has seen slower growth and seems to be in a better position to weather the current storm.

This year should see rents in Thailand rise, especially in the residential and retail sectors. Expansion in the retail sector is not expected to slow down, despite the prospect of higher overheads, though. Property revenues are expected to be slightly down, from around Bt1.59 billion in 2007 to Bt1.5 billion in 2008. The financial industry in the region will be impacted by the US crisis, but opportunities will not disappear entirely. Property law and tax reform changes mean that foreign investors now have an easier time if they are looking for property investment in Thailand. Basically, Thailand has become a more stable and secure prospect, albeit one with lower initial returns, than many other Asian markets.

Both internal and external reports confirm that condos in Thailand are still a good investment. The Bangkok Post says that high end condominiums and properties are holding their own in the market, despite political turmoil. This is linked to tourism performance in Thailand, as the country remains one of the most sought after destinations world wide. Singapore and Hong Kong, where much of Asian money is concentrated, favor Thailand as a holiday destination, and this is translating into some stability for the property market in Thailand at the moment.

Don't shun the Thai market because of slower growth - it is the choice for stable, long-term investors at the moment.
About the Author
Gregory Smyth is an independent author providing assessment and comments on leading International Property Consultants in Asia and Greater China , especially CB Richard Ellis.
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