Why Thailand’s Luxury Real Estate Market Remains a Perfect Choice for Investors

Why Thailand’s Luxury Real Estate Market Remains a Perfect Choice for Investors

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Thailand has quite a knack of shrugging off socio-economic setbacks. The country previously earned the affectionate nickname of ‘Teflon Thailand’ during the 2000s, as floods, region-wide financial crashes and coups did little to waiver economic growth. More recent setbacks such as the death of His Majesty the King (and more coups) have been met with similar resistance.

And while the overall economy has, at times, started to show cracks with growth falling behind neighboring ASEAN countries, one sector that remains surprisingly strong is Thailand’s luxury real estate market.

Resilient economy through 2017

Thailand’s overall economy has been a key factor that has reassured investors in the country’s real estate market.

The national GDP in the first quarter of 2017 increased by 3.3% compared with a rate of 3.0% in the fourth quarter of 2016, with experts citing the private sector as the primary driver of the growth.

According to the Office of the National Economic and Social Development Board, the latter part of 2017 is set to see Thailand’s economy grow by between 3.3% and 3.8% – a continued improvement from the growth rate of 3.2% in 2016.

The recovery of the export sector, increased public investment, a further revived agricultural sector, and the expansion of the tourism sector will all play their part in these improved economic conditions.

Furthermore, mortgage interest rates have remained low, which is another positive influence for both investors and developers in the luxury real estate market.

A strong capital sector

In the capital, there are several factors which explain the sustained demand for high-end properties, particularly new-build condominium units.

For example, more and more affluent young Thais are breaking traditional norms and opting to live away from their family homes after finishing school, with trendy neighborhoods like Sathorn, Thonglor and Phrom Phong being the preferred locations. As a result, these areas have experienced wide-scale development, with many of the new real estate projects falling into the luxury bracket.

Other catalysts that have stimulated the market include major infrastructure projects such as the lengthening of the BTS Skytrain system, as well as increased Chinese investment and a less volatile Thai Baht.

Between January and March 2017, newly-launched condominium projects provided over 12,000 new units in Bangkok – an increase of 7.12% compared to the same time period in 2016. Currently, there are over 1,000 brand new luxury properties (those costing over THB 10 million) available for purchase in the capital.

More luxury units than ever before

The last few years have seen land prices continue to rise steadily throughout the country; however, it’s the sought-after locations in Thailand such as downtown Bangkok, Phuket, Koh Samui and central areas in the coastal towns of Hua Hin, Cha-Am and Pattaya that have seen the most dramatic price hikes.

For example, prime land in Bangkok is often priced at over THB 1 million per square wah. This, in turn, has further catalyzed the luxury property market, as developers are forced to build high-end properties to be able to turn a profit.

In recent times, we have seen luxury residences in the capital smash pricing records, while more luxury villas, duplexes and even mansions are springing up in the southern and northern regions than ever before.

This trend in the market is likely to continue over the coming years to keep up with growing demand from both domestic and foreign investors.

Perks for foreign investors

CBRE found that non-Thai investors make up around 15% of the property market nationwide, with many preferring to invest in the country in order to avoid costly stamp duties that foreigners have to pay elsewhere in Asia, such as Singapore and Hong Kong.

For foreigners, Thailand also presents higher potential returns on investment. Global Property Guide found that prices in Singapore, Japan, Hong Kong and Taiwan were typically 100-600% higher than in Thailand, which reflects the lucrative nature of Thailand’s real estate market – particularly those higher-end properties in desirable locations like Bangkok, Phuket, Samui and Hua Hin.

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