Best real estate market Thailand

Union de Banques Suisses (UBS) forecasts in a recent study from its property department an exponential growth in the Asian real estate market that has the potential to push the investments in Asia from US$ 11billion to US$100 billion by 2010.

According to Charles Neo, Co-Head of Asia Property Research at UBS Investment Bank, "models indicate that the capitalization of the Asian real estate market has the potential to increase from US$11 billion today to US$100 billion by 2010. Clearly, this will lead to a substantial change in the competitive landscape of Asia's property market," noted Neo.

Thailand's property outlook continues to remain very healthy, especially in the residential housing market, condominium and the office building sector, according to international property analysts. Real estate analysts gathered at a seminar said that the Thai property sector continues to show healthy trends and growth would remain positive in the future.

"There are many factors (see section Advantages of Thailand) that are supporting the growth of the residential sector in Thailand", noted Asian Property Development's chief executive officer.

One of the reasons why Asia will become so attractive to investors over the next few years is because half the world's population resides in Asia (China, India, Vietnam, Thailand and Indonesia) and it is a huge but yet still untapped economical market with a huge potential for growth. Asia is also one of the preferred destinations of international tourists with 104 million arrivals in 2000, 150 millions in 2005 and more than 190 million anticipated in 2010. The New Bangkok International Airport opened September 2006 is expected to have an initial capacity of 45 million passengers in Phase I, later increasing to 100 million passengers in Phase II.

Thailand has a well established reputation of being a beautiful country with warm, friendly people, but Thailand is more than a beautiful country. The Kingdom of Thailand cumulates several advantages including, its central location, strong economy, constant tourism growth, note worthy medical sector and infrastructure.

Thailand's image as a vacation paradise is so well established overseas that it has become resilient in the face of adversity and neither economic nor social ills or natural catastrophe can damage the nation's global popularity or diminish the country's appeal as a holiday destination.
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All sectors of the real estate market, in Thailand, over the last three years, started growing and will, according to the experts, continue to do so over the next five years.

Properties in Thailand still remain cheap in comparison to most places in the Western world - 200,000 Euros (or 250,000 Dollars) will buy a substantial detached house with pool or a luxury seafront condominium with excellent quality being the norm. This European-come-Western fund influx has helped create a very vibrant property scene, with many new developments underway and prices bubbling upwards. At this time, supply is keeping up with demand on most property fronts and this is just about keeping the lid on the price pot. But prices are steadily rising. Many agents and property watchers are predicting some serious upcoming price hikes over and above other factors such as oil price, other commodities and improving building standards and specifications. Developers in Thailand have proven their ability to deliver high-quality properties using superior construction materials and well-designed layouts offering a full range of facilities.

Foreigners wishing to live over one year in Thailand can very easily apply for "Non - O (retirement) Code Visas". To be eligible for the visa, which is renewed yearly, the foreigner must be over 50 years of age, with no plans to work in Thailand. They also need a copy of a bank statement showing a deposit of no less than Bt 800,000 (the money is not blocked and can then be used by the retiree to support his living expenses), or an income certificate with a monthly pension of not less than THB 65,000, or a mix between a deposit account plus a monthly income. Note that in the case of a married retiree couple the 800,000 THB requirements covers the couple's needs.
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While the residential housing market has been growing steadily over the last few years it will continue to do so due to Thailand's increasing growing popularity among people looking for a new life.

According to Raimon Land research department (one of Thailands' Top Developers) a new market is developing in Thailand which will benefit the already growing residential housing and condominium sector. Thanks to Thailand's low cost of living and year-round warm weather, and as the traditional European retiring hotspots wears off because of rising costs, more and more retirees are now looking to settle in Thailand. Aging baby boomers looking for a new life are according to Henri Young of Raimon Land definitely a market we see as being a growth market in the coming years.

The hotspots are Phuket, Pattaya, Koh Samui and a recent newcomer Hua Hin.

While not that well-known on the international stage, Hua Hin a seaside town, has long been a popular spot for retirees given it's a fair bit quieter than other resort hotspots like Pattaya and Phuket. "Over the last year Hua Hin has begun to boom," says a local real estate agent. "People looking for retirement homes seem to be investing early. They've caught on to the fact that prices are going to increase rapidly over the next few years, they already are. I'm finding probably about 40 per cent of my traffic at the moment is from people intending to use the home as a holiday home over the next few years with a view to retiring here permanently."

Meanwhile, in Phuket, developers are now creating projects that appeal to the older demographic segment. In fact, one developer is going the extra mile and offering prospective retirees a way to literally just get up and go once their working years come to an end.

Even the Thai government is in on the act, with its Thai Longstay Management Company (TLM), set up as a private company in 2002 with the endorsement of the Thai Cabinet and the Tourism Authority of Thailand as the major shareholder, TLM assists foreign nationals in planning and booking extended or longer-than-average stays in Thailand.

Asian Property Development's chief executive officer said there are many factors that are supporting the growth of the residential sector in Thailand. About 33% of the Thai population is aged between 25-44 years, which is a very good demographic for the domestic housing market, especially in the middle-end sector, he said.
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Ian Soo, managing director of Hamptons Property, believes that investment in condominiums is very viable, especially when one considers the main investment alternatives to real estate bank accounts, where interest rates are extremely low and the stock market, which has been volatile in Thailand over the past 2-3 years. However, most quality residential condominiums in Thailand offer around a 6% rental return, compared to 3.5% in Singapore for instance. All this, too, without considering the potential for capital gains as the condominiums unit's value increases. He also believes that the market is very safe, since people will always need a place to live.

In Bangkok, while the general consensus among real estate firms is that there is still a strong demand in the residential market the prospects of the condominium market will depend on the type of properties put on the market. Affordable condominium projects and upper high-end market are expected and will continue to fare well, while the market has for now reach a peak in the medium price condominium market where offer and demand are in balance.

According to Raimon Land research, prices for inner-city condominiums have risen by over 30 per cent in the last two years, and some high-end projects launched on Sathorn Road in the past few months are now priced at up to Baht 130,000 per square meter.

"I think they'll plateau there for probably 12 months," says Cornick of Raimon Land. "What you will see is a really prime Grade A product coming into the market that will then test those benchmarks and push prices up to the 200,000 euros mark."

Meanwhile, increased competition in Bangkok's residential market is leading some developers to look at other areas of real estate that have still a strong potential to grow such as sea side resorts Phuket, Pattaya, Jomtien, Hua Hin, Cha Ham, Koh Samui or main land places like Chang Mai whose still present a huge potential for growth.
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This market, boosted by the strong economic performance of Thailand over the last 3 years, and by the fact that during the last 6 years very few new Grade A office buildings have been put on the office building market, has seen a huge increase of the rents that will continue over the next 5 years. There lies a huge potential capital gain to be made on office buildings in the Center of the City but also for projects in new locations outside the city center.

This analysis for the Sector of Office Building Markets is confirmed by the forecasts made by Savills (Thailand) Limited that can be summarized as follows:

• Following a period of excellent performance in 2005, the Bangkok office market in 2006 is expected to see a period of rental stabilization but only in the short-term and the overall Bangkok office market will resume the pace of rental increases seen in 2005 rents. By late 2006 average rentals for offices may have increased by as much 100 per cent since 2000 in some prime locations.
• The Bangkok office market should not expect any major downward trend in office rentals until there is a repeat of the over supply situation which is not anticipated for at least another 4-5 years.
• A new market in new office development should commence over the next few years with a decentralization of new Office Projects as downtown rents spiral upward and as traffic congestion shows no signs of abating. Locations for decentralization include to a limited extent the new airport, and more realistically areas near to the existing Don Muang airport, which should benefit from greatly improved traffic flow as the new airport opens and a positive shift in related commercial and visitor traffic occurs in an area with excellent road infrastructure.

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Another sector of the Thai real estate market which is also soaring is the market for Industrial Land which is according to international property consultants CB Richard Ellis Thailand's starting a new cycle of growth.

Demand for industrial property in Thailand has grown significantly in 2005, and CB Richard Ellis expects that Thailand's industrial property market will still have a strong growth rate in 2006 and the following years. The total amount of industrial land sold in 2005 was 4,008 rai (1,603.2 acres), which is the highest record of industrial land sales since 1999.

This growth is essentially a result of both international and national markets starting a new investment cycle, as shown by the Manufacturing Production Index (MPI) and Industrial Capacity Utilization (ICU), despite the generally slowing economic growth. The majority of the foreign investment is still from Japanese companies.

There has been yet no change in the asking price at most industrial estates and parks, quarter-on-quarter. However, we expect Serviced Industrial Land Plot (SILP) prices to increase, because developers will soon need to purchase additional land for future expansion at higher prices.

Developers with Ready-Built Factories (RBFs) will profit of the growth as demand for RBFs is growing, as foreign companies seek to relocate or set up new production facilities in Thailand. Indeed, while labor is more costly in Thailand than in China, Thailand has still several competitive advantages such as excellent infrastructures and utilities, modern roads network, telecommunications, well educated labor force. Factories located in Thailand which is a member of ASEAN (the South East Asia equivalent of the EC) benefit also of an access to the 350 millions habitants of the ASEAN market.
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Land prices are rising steadily supported by the overall good performance of the Thai Real Estate Sector and by the scarcity of good properties.

While there is less good land available (good in the sense of non developed land with the potential of a quick good capital gain) there are still opportunities for those people with a good understanding of the local market. Over the last two years we have witnessed several transactions made by Investors that have doubled or tripled over a few months the investment made on non developed land purchase. There are still such opportunities available now but they will become less and less frequent in the future. Therefore it is certainly the best time to invest in Thai Real Estate Market as there is still whole area of the country which is not yet fully developed and where opportunities exist to purchase land at prices which are still affordable and that yield potential capital gains.
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A number of factors combine to give Thailand strong potential to sustain a robust rental market but three are very important. On one hand, an impressive portfolio of amenities; school, hospitals, marinas, golf courses, spas, shops and so on, and well developed and maintained infrastructure. And, on the other hand, a unique accessibility: one third of the world's population lives within a 5-hour flight from Thailand, including the emerging Chinese market. An increasing number of low cost carriers and airlines go to Thailand. Then, the last is the low cost of living, about a third of the price of living in Europe.

As Thailand becomes more established on the international arena, it is attracting a more upwardly mobile and sophisticated set of visitors looking for more privacy and freedom than traditional hotels can provide. To meet this increasingly strong demand for short-term rental and holiday properties, some developers are creating tailored rental management services for owners wishing to capitalize on this profitable market. Rental management services establish channels to advertise the property and find short and or long term tenants.
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