The booming tourism industry has opened up new opportunities to Thai property developers who should focus more on foreign investors, especially the Chinese.
Thailand remains appealing to most foreign investors due to the relatively low prices of real estate and reasonably high rental yields. The purchasing conditions in Thailand are also less complicated compared to many other countries, with relatively low down payments and small transfer fees.
Previously, the majority of foreign condominium buyers in Thailand were predominantly from Hong Kong or Singapore while the Chinese demand was minimal.
Due to the weak domestic demand in the past two years, Thai developers have been expanding their customer base by holding overseas marketing campaigns to adapt to the economic situation. As a result, we have seen more Chinese buyers purchasing condominium units in Bangkok and other major tourist destinations in Thailand.
According to Baidu, China’s top search engine and web portal, Thailand ranked seventh in the world where Chinese searched for real estate investments in 2016 and second among Southeast Asian countries after Malaysia, which has better market exposure due to their good relationship with China.
Most developers in Malaysia have implemented long-term overseas marketing campaigns over the last 10 years, including offering property investors the right to apply for residential permits.
However, the trend of foreign investors investing in residential units in Malaysia has only been seen since 2012, particularly in Penang.
Based on Baidu’s statistics, of the total Chinese capital invested in Thailand, about half was for investment purposes.
Chinese investors tend to buy properties priced below 10 million baht and primarily located in downtown Bangkok or midtown areas with easy access to mass transit stations. They also purchase in tourist hubs such as Chiang Mai, Pattaya, and Phuket.
In Malaysia, Kuala Lumpur and Penang are the two most attractive locations for foreign investors. This is similar to Thailand, where Bangkok and Phuket are the perennial favourites of foreign investors. Bangkok and Kuala Lumpur, both being capital cities, have similar characteristics such as extensive infrastructure and close proximity to facilities and amenities. Likewise, Phuket and Penang are both coastal areas popular for holiday homes.
Thailand is still a relatively new market for Chinese residential real estate investors compared to Malaysia, which has been popular with the Chinese for over 10 years. As a result of today’s growth in popularity of Thailand to Chinese tourists, there is greater potential for Thai developers to sell their developments to overseas buyers.
Thai foreign ownership regulations allow foreigners to collectively hold freehold ownership of up to 49% of the saleable area in a condominium, which is considered more friendly than many of its neighbours.
Currently, foreign investors account for approximately 10-15% of condominium owners in Thailand, compared to 30% in Malaysia. With Thai laws allowing foreign ownership up to 49% of a condominium project, there is a lot of room for growth.
The upward trend in the tourism industry should help bolster foreign property investment in terms of heightening the market exposure to the tourists who can potentially decide to purchase property once they become familiar with the market.
Chinese tourists account for around 30% of visitors to Thailand. Combined with the fact that Thailand was ranked as one of the top destinations for Chinese property investors, there is high potential for growth in Chinese property investors.
To further attract foreign investment in the long term, developers must continue to improve construction quality, design, and safety to meet international standards as international buyers have much greater choices all over the world.
Another important area is in providing excellent customer service throughout the transaction process, especially in providing transparent transaction terms, fee structures, taxation regulations, and transfer processes for foreigners.
These will help in gaining the trust of the international buyers and increasing customer loyalty as well as in making them recommend projects in Thailand to other buyers.
Chotika Tungsirisurp is an associate director and Ratha Techasopapan is an analyst at CBRE Research and Consulting, CBRE Thailand. They can be reached at bangkok@cbre.co.th Facebook: CBRE.Thailand Twitter: @CBREThailand LinkedIn: CBRE Thailand and website: www.cbre.co.th