by Daryl Lum | Jan 29, 2019 | News
On the 28th of January, the Business Times ran a report entitled “Thai property can stay hot in chillier times”. It narrated the demand that is expected to come from the Chinese and how as the Chinese middle class continues to grow and accumulate wealth, the demand for property investments in Thailand will remain strong. These are the factors that will encourage the Chinese to invest in properties in Thailand, mainly Bangkok.
1) Thailand is considered a safe haven
In an era with great turmoil around the world and with the US and China embroiled in a trade war, Thailand is seen as a safe place to park their monies. The Thai Baht has proven to be very resilient over the past decade.
2) Benchmark interest rates are still low
Thailand’s benchmark interest rate is at 1.75 per cent and inflation is at about 0.4 per cent. This means that lending cost is low and this is a huge benefit for the construction industry. Mortgage rates for locals are very attractive. So much so that the Thai government needed to step in to regulate excessive risk-taking in the property market.
3) Tourism is still a very strong driver of the economy
Tourism contributes about one-fifth of Thailand’s Gross Domestic Product (GDP). Bangkok is still the world’s most visited city in the world, even ahead of cities like London.
4) The Thai government is expanding its visa-free entry policy for the Chinese
In a bid to entice the Chinese to visit Thailand, the Thai government implemented a visa-free entry policy for the Chinese. Now they are extending this policy till 30th April 2019. This waiver alone is expected to boost tourism by 30 per cent.
To read the full Business Times article, visit this link:
https://www.businesstimes.com.sg/real-estate/thai-property-can-stay-hot-in-chillier-times
The team at Invest Bangkok Property is positive of price growth in the medium to long term. In the short term, due to external factors like a slowing global recession and repercussions of a trade war between the two largest economies in the world, we would recommend clients make property investments with a longer horizon. The elections should go along smoothly but if it does not, there is a chance that it will adversely affect the Thai economy. The Thai economy and correspondingly, the Thai Baht has been the standout performer in South East Asia in the past decade. For a narration of how strong the Thai Baht has been, you may refer to this article: My views on the Singapore and Bangkok property markets.
Yours Sincerely,
The Invest Bangkok Property editorial team
by kevinyeo | Jan 21, 2019 | News
Despite increased competition from rental units in condominiums, the prospects for the single-ownership apartment market in the prime areas of Bangkok are still positive, according to property consultant CBRE.
Most expatriates working in Bangkok rent rather than buy a property. The expatriate rental market is competitive because the number of expats working in Bangkok is not growing, except for the Chinese. However, most Chinese expats have much lower housing budgets than Japanese, American and European expatriate tenants who have been the traditional source of demand for central Bangkok residential rental property.
Based on over 3,000 residential rental transactions over the last 10 years completed by CBRE, rental budgets have not grown. The median monthly rent is around 90,000 baht for a three-bedroom unit and 80,000 baht for a two-bedroom unit.
It is worth noting that CBRE focuses on the upper end of the market, so these numbers are higher than the average achieved rents for the whole of the expat rental market.
Most expats only want to live in a limited number of locations, with the preferred locations between Asok and Thong Lor on Sukhumvit Road, Lumpini and parts of Sathon. They tend to rent in an apartment where one entity owns the whole building, or from an individual buy-to-rent investor in a multi-ownership condominium building.
Based on the latest survey by CBRE Research, “expatriate standard” single-ownership apartment buildings in downtown Bangkok contain a total of only 10,000 units. By comparison, there were 80,000 condominium units in the same preferred expatriate rental locations. CBRE estimates 35-40% of these units are owned by buy-to-rent investors. There is limited new apartment supply, but continued growth in condominium supply.
Many tenants, particularly Japanese expats, prefer to rent in apartment buildings where they have a single point of contact with the owners’ representative for all management and maintenance issues.
In a condominium, the building’s property manager is responsible only for the management of the common areas and not for maintenance inside the units.
“Although expat tenant numbers and their rental budgets are not growing, there are still profitable opportunities for apartment developers despite increased competition from rental units in condos,” said Theerathorn Prapunpong, head of advisory and transaction services (residential leasing) at CBRE Thailand.
The key to success for landlords, he says, is not just location but providing the optimum unit size by maximizing the utility of the space, and providing a high standard of finishing, furnishing, facilities, and appliances.
A good example of an expat-friendly building is the recently completed Jitimont Residence opposite J Avenue on Thong Lor Soi 16, for which CBRE is the sole leasing agent and property manager. The development shows how single-ownership rental apartments can still compete with condos with a range of units from 1-3 bedrooms, together with a design and specification that appeals to expat tenants.
Mr. Theerathorn does not foresee a big increase in expat tenants or their housing budgets this year but believes quality apartments will still achieve high rentals and occupancy.
source: https://property.bangkokpost.com/news/1613270/expat-apartment-demand-still-strong
by kevinyeo | Jan 20, 2019 | News
Capital controls at home and appealing prices in Bangkok are drawing high levels of real estate investment to Thailand.
The beginning of the year is a chance for people to take a deep breath and think about the long term. That’s why the most frequent question I get these days is about the full-year outlook for Chinese property buying in 2019.
The No.1 factor overlooked in Thailand is the degree to which Chinese property buying is the result of stimulants outside of Thailand. Bangkok-based market observers sometimes overrate the importance of local conditions to Chinese demand. Their frame of reference isn’t big enough.
Yes, local factors such as prices, yields, and fluctuations in the value of the baht help pull Chinese buyers to Thailand. However, for several years now these local factors have been much less important than the sheer number of Chinese families who are seeking attractive overseas real estate — now and in the years to come.
Please do not misunderstand me. Am I saying Chinese acquisitions of Bangkok condominiums will increase every single quarter? No, I am not.
What I am saying is Chinese buying is not like sunny weather that comes and goes. It is like a river that rises and falls but is always present and significant.
TWO KEY FACTORS
The first of the two key drivers for Chinese property purchases in Bangkok is the growing wealth of Chinese consumers with few appealing investment opportunities at home. The second is Beijing’s programme of capital controls.
Even though China’s economy is no longer growing at rates of 10% and higher, the growth rate is still more than 6%. That’s more than twice what is now prevalent in the US, a country China will pass in GDP size this decade. China has already surpassed the US to become the world’s largest manufacturer and biggest exporter. With about four times the US population, China has much more scope to grow.
The investment bank Credit Suisse counts 3.5 million US-dollar millionaires in mainland China. There are many more of what you might call “upper middle class” consumers. While the latter cannot generally afford to buy real estate in more expensive markets such as the US and Australia, they can do so in Bangkok — where prices start below the equivalent of US$150,000.
On a population-wide scale in China, wealth per adult has more than quadrupled over the past six years. For every one dollar the typical Chinese adult possessed in 2013, they now have four dollars.
It’s not just their growing riches that account for Chinese real estate buying. They also tend to trust real estate more than other assets.
Chinese banks offer only low-interest rates on deposits. The volatility and immaturity of Chinese equity markets made the Shanghai Composite Index the world’s worst performer in 2018. The government has enacted new rules that make it difficult to invest in Chinese real estate. And many alternative Chinese investments such as peer-to-peer lending and private equity funds have collapsed due to fraud, poor management, and government crackdowns.
Because few other appealing investment opportunities exist, the Chinese have put 53% of their wealth into real estate. In a 2018 survey, Chinese overseas investors named residential property their favorite asset class.
All of this evidence suggests the Chinese investor market is large enough, growing fast enough, and wealthy enough to generate significant demand for Bangkok condos for decades to come.
INVESTMENT SHIFT
Now, let’s look at capital controls, which is a key reason that Chinese investors choose Bangkok and other Thai markets instead of cities in other countries.
Capital controls are as responsible for the growth in Chinese demand for Thai property as any other single factor. Beijing has always regulated the movement of money out of China but long overlooked violations. In December 2016, however, the authorities began much stiffer enforcement.
Capital controls reoriented many Chinese buyers from more expensive markets such as Australia to less expensive markets such as Thailand.
When it suddenly became harder to move large sums of money, Chinese buying inquiries for Thai property surged as a share of their inquiries about property worldwide, from about 5% in 2016 to more than 13% in 2017 and even higher in 2018.
Capital controls, growing Chinese wealth, and a dearth of other investment opportunities — these are the megatrends that push Chinese buyers towards Bangkok real estate.
For Thai developers and agents to take advantage of these trends, they must find effective ways to work with Chinese buyers. Those that do should be able to depend on them to pick up a significant share of their foreign buyer quota for years to come.
source: https://property.bangkokpost.com/news/1607958/megatrends-driving-chinese-demand
by Daryl Lum | Jan 13, 2019 | News
For the longest time, Japan has been the main contributor to foreign direct investment in Bangkok. Downtown Bangkok is home to the Japanese community as evidenced by the heavy Japanese influence in areas around Phrom Phong, Thong Lor and Ekkamai. There are many Japanese dining and retail outlets along this stretch. Japanese developers like Sankyo Home have produced many Japanese inspired developments in central Bangkok. Major developers like Sansiri still collaborate with Japanese developers like Tokyu Corporation to develop projects like XT Ekkamai and The Base Sukhumvit 50. Japan has done a lot in terms of developing Bangkok to what it is today. However, increasingly in recent times, the Chinese have been taking over. The main reason is their desire to have an inward rail network from China through South-East Asia. This is their One Belt One Road Initiative.
Just like the Japanese, the Chinese do wield their influence on a certain number of areas. The Japanese congregate around Phrom Phong, Thong Lor and Ekkamai whereas the Chinese prefer areas like Rama 9, Thailand Cultural Centre and mainly Huai Khwang. There is a new Chinatown developing around Huai Khwang and it is littered with Chinese food stalls and frequented heavily by the Chinese who reside in Bangkok as well as the Chinese tourists. This is one of the reasons why we favour projects next to Huai Khwang MRT and Thailand Cultural Centre MRT heavily. XT Huai Khang and Noble Revolve Ratchada 2 are next to Huai Khwang MRT and Thailand Cultural Centre MRT Stations respectively.
The Chinese also favour developments in the developing area of Bangsue. This is where the Bangsue Grand Station is located. If you are still clueless as to what Bangsue Grand Station is and the significance of this project, please read this article from the Nikkei Asian Review:
Understanding the grander scheme of things will help us make better investment decisions. There is no one who can guarantee that an investment will definitely profit. Even the smartest minds handling most of the world’s wealth were responsible and affected by the Global Financial Crisis in 2008. All we can do is make investments whereby our investment decision is well thought of and we try to make decisions which give us the best chance to gain profits.
The article listed above is a good explanation of what is happening in Bangkok. I would urge all investors and potential investors to read the article.
Yours sincerely,
Daryl Lum
by kevinyeo | Dec 13, 2018 | News
New mortgage curbs could shrink domestic demand as a shift to foreign buyers raises other concerns, says CBRE.
Uncertainty is looming in the Bangkok residential property market, according to CBRE, the international property consultancy. Although developers have recently increased launches of condominiums, sales to Thai buyers have slowed in some locations and are likely to slow further with the coming imposition of tighter mortgage lending.
Some developers are trying to find locations where there is real demand from Thai end-users and to develop projects that buyers can afford, CBRE says. Others have increased their reliance on sales to foreigners, even though there is uncertainty as to who will be the final occupant.
The downtown expatriate rental market is stable, but CBRE believes that the local rental market in midtown and suburban areas is quite flat, so buy-to-rent investors may not achieve the yields they were expecting.
The Bank of Thailand recently imposed tighter regulations on mortgage lending by reducing loan-to-value (LTV) ratios for certain categories of purchasers in an effort to curb mortgage and property market risks and improve housing loan quality.
Effective from April 1 next year, these new measures will favor first-home buyers with genuine demand, as opposed to buy-to-rent investors with multiple outstanding mortgages who are searching for yield.
Although the new rules will not force developers to collect minimum down payments at contract signing, they will be encouraged to collect higher down payments to reduce the risk of loan defaults upon transfer. This will reduce the demand from speculative buyers, as they will be required to pay up to 20-30% down instead of 10-15% now. These measures will certainly cool and stabilize the overall market.
With domestic demand expected to shrink as a result of the mortgage restrictions, CBRE foresees a domino effect: developers will further shift their reliance towards foreign buyers, who purchase primarily with their own funds, as all the money must come in from abroad in foreign currency to comply with foreign condo ownership regulations.
CHINESE BUYING IN BULK
Many developers have already increased foreign sales, particularly to Chinese buyers, both in the form of individual purchases and bulk purchases by Chinese property agencies. Several projects have reached their foreign ownership limits (49% of the saleable area), something that used to be a rare occurrence.
“This further raises our concerns about whether high reliance on foreign sales is positive,” said Aliwassa Pathnadabutr, managing director of CBRE Thailand.
“It is still uncertain whether these foreign buyers will transfer title if they are speculators, and there is no clarity on who will live in these units once construction finishes. Most of the foreign buyers are investors, and we doubt that they will live in the units that they bought.”
According to a survey by CBRE Research, roughly 7,200 units were launched in the downtown area in the third quarter of 2018, compared with just 1,300 in the first half of the year. Total units launched downtown in the first three quarters are up 8% from the same period last year.
The average asking price of units in freehold condominium projects under construction (high-end and above) in downtown Bangkok edged up 1.7% year-on-year to 277,000 baht per square meter. CBRE does not believe these prices will drop, except possibly in a very limited number of completed projects with a lot of unsold inventory.
According to developers, sales of under-construction condominium units in the downtown area have dropped to 67% of the total available from 77% in the same period last year. The outlook is for sales to be relatively slow with buyers being more selective, especially for projects that are asking for more than 300,000 baht per sqm.
CBRE Research reports that a total of 18,200 condominium units were launched in midtown/suburban areas in the third quarter, the highest since the third quarter of 2013. The total for midtown, however, was down 4% from the same period last year.
Developers are now focusing on locations along future mass-transit lines such as the extensions of the BTS Green Line and MRT Blue Line, as well as the under-construction MRT Orange, Yellow and Pink lines.
The average asking price of off-plan condo units in midtown/suburban Bangkok increased 5.6% to 99,700 baht per sqm. The sales performance of more than 200 projects under construction was 71%, compared with 59% in the same period last year.
TRANSFERS UNCERTAIN
CBRE attributes the improvement in sales performance in midtown/suburban areas to block sales to Chinese property agencies, though it’s uncertain whether these sales will actually translate into transfers at completion.
With rising supply and uncertainty about demand from domestic end users, the outlook for the condominium market has become more uncertain.
In the downtown market, developers may have to revise their price expectations or focus on central locations with slightly cheaper land such as Sukhumvit Soi 63 (Ekamai) rather than Sukhumvit Soi 55 (Thong Lor).
The Midtown/suburban market will have to be increasingly reliant on Thai end-user demand for projects where buyers can get a mortgage, with fewer speculators and buy-to-rent investors.
In the downtown expat rental market, the number of expatriates with work permits increased by 2.7% in the third quarter and there was no change in monthly residential rental budgets. The market situation overall remains unchanged with limited new apartment (single ownership) supply, but increased condominium supply.
CBRE estimates that 30-40% of the new condominium supply will be offered for rent by the individual owners when the buildings are completed.
by kevinyeo | Dec 11, 2018 | News
Rental demand in the popular Bangkok neighborhood is always strong among expats, especially Japanese.
The condominium market in the mid-Sukhumvit area (from Sukhumvit Soi 21 to Ekamai Road) has shown continuous growth, with a surge in selling prices per square meter over the past five years, according to Nexus Property Marketing Co Ltd.
Average selling prices in this popular residential area of Bangkok have risen by 8.2% per year on average, followed by 7.2% in the Pathumwan-Ratchathewi area and 6% in the Sathon-Bang Rak area. Mid-Sukhumvit features a total of 191 projects with 43,418 units, 88% of which have been sold. Pathumwan-Ratchathewi has 135 projects with 38,912 units and Sathon-Bang Rak 86 projects with 20,385 units.
One of the most attractive locations in the mid-Sukhumvit area is Thong Lor, known for an abundance of famous restaurants, stylish cafes, and small community malls. Local charm makes it a prime area for those who want to live in the city center and for those who see a good opportunity to invest in and rent condos to Thais or foreigners, especially Japanese.
The appeal of Thong Lor can be seen in average selling prices for high-end condominiums, which have reached 250,000 baht per sqm, said Nexus managing director Nalinrat Chareonsuphong.
In reviewing sales records for 50 condominiums with a total of 11,386 units in Thong Lor between 2003 and 2018, Nexus found the average final price per sqm was 12% higher than the average when the projects were first launched. However, the average resale price was up 32% of the average opening price during the last 15 years.
From an investment perspective, sales prices of condominiums in Thong Lor have advanced at a faster pace than rental rates. Consequently, the investment yield in new projects may not be as high as in existing projects.
A survey of the condominium rental market in Thong Lor shows the average annual yield is between 3% and 6% with properties falling into three groups: high yield at around 6%, average at 3.8% and low at 3%. The differences reflect various factors such as location, price, unit size, common spaces, surroundings, and extra services in each building. Nexus has identified three main factors for projects to achieve high yields of 5-6% as follows:
Location. This is the first factor everyone considers when they want to buy condominiums for investment. The project should offer ease of access, be near public transport, linked to main roads and surrounded by conveniently reachable stores and restaurants.
Services. Complete services have a strong impact on purchasing decisions. If projects can provide extra services such as shuttle transport or private taxis and coordination of housekeeping, car wash, and repair service agents, they are likely to attract more attention from tenants.
Maintenance. This helps sustain a good image for a condominium. If a project has been open for a long time and is still in good condition, tenants will be more confident and will stay longer. Investors will see a higher return than at a newly launched project where they would have to buy at a higher average price.
Although the average yield in Thong Lor is modest at around 3.8%, rental demand in Thong Lor has never fallen and is stronger than in some other areas of the capital with higher yields.
Thong Lor is the expat center of Bangkok, and foreigners, especially Japanese, like to live there because there are many restaurants, stores, and amenities that suit the Japanese lifestyle. Therefore it’s not surprising that Thong Lor has become a prime rental market.
“Thong Lor is an attractive location for property investment because there is high demand from foreigners who are looking for a place to rent and it offers more possibilities of obtaining a consistent return,” said Mrs. Nalinrat.
“In the Thong Lor area, the sooner you invest, the better the yield you will get in the future, as the average selling price keeps going up every year, so the yield could go lower.”
source: https://property.bangkokpost.com/news/1580186/high-yield-condos-in-thong-lor
