Property Futures

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Residential real estate in Thailand cheapest in Asia Pacific region

Article:  despite the strong baht, Thai residential property is highly affordable.

Despite the strength of the currency, the country is still one of the most affordable investments in the Asia Pacific.

When thinking about Thailand most automatically think of Bangkok – and it is no different when it comes to investment in real estate and finance.  This perception is changing, however, as other cities begin to show signs of increasing real-estate activity.

Thailand property market analysis

Thailand real estate market analysis

Pattaya, a coastal resort city south of the capital on the Gulf of Thailand, has witnessed booming real-estate activity since 2008. In the eyes of local realtors and observers, it is the “second city” after Bangkok, and the growth in tourism in the area is attracting the attention of domestic and foreign investors.

You should keep in mind that Thailand real-estate investment is attractive to many foreign investors because they often serve as second homes and can deliver returns on investment by being rented out when not in use.

You should also bear in mind that this market is not regulated; it is always better to consult a good local lawyer before investing.

  • The strengthening of the baht has pushed up property prices in dollar terms but Jones Lang LaSalle, a property consulting company, says that this has had no major impact on transactions.
  • The appreciation has caused concern particularly in sectors that rely on foreign buying, such as high-end condominiums in Bangkok or resort properties in tourist destinations.
  • A sharp appreciation is unlikely according to economists, though could change the situation.

Residential real estate

The price index for single detached houses fell by just over 1% (3.59% adjusted for inflation) during the year to end-Q2 2012, according to figures from the Bank of Thailand (BOT).

On a quarterly basis, it declined 1.81% (3.03% adjusted for inflation) in the second quarter, which is the second consecutive decline.

However, during the year to the end of the second quarter of 2012:

  • Townhouse price index grew by 3.3%
  • Condominium price index grew by 6.8%
  • Residential land price index grew by 0.5%

The country’s gross domestic product (GDP) growth recovered right a stronger-than-expected 4.2% year on year from the devastating effects of the floods. Despite some uncertainties, the domestic economy is expected to grow by a healthy 5.7%, according to figures from the Bank of Thailand.

The Bank of Thailand changed some rules to allay public fears about a property bubble, especially in the condominium market.

  • For condominium units under THB 10 million (USD330,300), bank loans must be limited to 90% of a home’s value.
  • Low-rise housing loan-to-value (LTV) ratios have a cap of 95%.
  • For larger loans banks must increase risk weighting to between 75% and 100% of the loan value. At present, the risk weighting for the property sector is 35%.

In fact, a bubble is unlikely to develop in the Thai property market because the price rises have been natural, according to the Government Housing Bank (GHB), a state-owned lending agency. Despite the substantial increases recently in low-end property, there is nothing to worry about.

The bottom line

Because of the existence of real demand as opposed to speculative demand, low-rise housing prices below THB 3 million (approximately equivalent to USD $99,000), which is 70% of the market, is likely to see continued growth.

Given the healthy growth in GDP and the continued affordability of property, investment in Thai residential real estate, investment prospects are promising.


2 comments on “Residential real estate in Thailand cheapest in Asia Pacific region

  1. Royal Cliff Pattaya
    June 4, 2013

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  2. Pattaya Shopping
    July 9, 2013

    Everything is very open with a clear clarification of the challenges.
    It was definitely informative. Your site is very useful.
    Many thanks for sharing!

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