5 reasons why overseas investment in Thailand is rising

In the last year, international interest in Thai real estate has risen on TheMoveChannel.com. Enquiries for property in the country rose 60 per cent in the second half of 2016, compared to the first six months. In Q4 2016 they climbed 37.5 per cent compared to Q3 2016.

Why is overseas investment in Thailand climbing? We break down the country’s international appeal into five key factors.

1. Low stamp duty

Thailand’s stamp duty is relatively low, which has become an increasingly attractive factor for investors. Indeed, other markets in the Asia-Pacific region have stepped up their property taxes, primarily in a move to deter speculative investment and cool price growth.

Foreign investors in Singapore, for example, have to pay 15 per cent stamp duty on any residential purchases. Hong Kong has also raised its stamp duty for non-first-time buyers from 15 per cent to 30 per cent in the last year. Thailand’s 0.5 per cent, by comparison, is highly favourable.

2. Thriving tourism

As with most popular lifestyle destinations, Thailand’s property market is partly tied to its tourism industry. Despite a crackdown on zero-dollar tours in the second half of 2016, Thailand welcomed a record number of tourists last year, with arrivals jumping 9 per cent to 32.6 million.

Tourist spending also jumped 12.6 per cent year-on-year to 1.6 trillion baht.

In resort hotspot Phuket, the recent Chinese New Year reaffirmed the country’s appeal to overseas visitors in 2017, with 257,000 Chinese tourists heading to Thailand during February’s Golden Week, up 10.8 per cent on the national holiday in 2015. Chinese spending rose 15 per cent year-on-year in Phuket to top 5 billion baht.

In Phuket, CBRE reports that international investors continue to the “main source of demand” for resort properties, with tourists often becoming expats.

“While principally driven by Western expatriates, Chinese buyers accounted for the increased number of units sold over Q3. No recovery in demand from Russian buyers was observed, despite the rise in Russian tourist arrivals in the third quarter. The number of properties being offered for resale increased Y-o-Y, with Western expatriates continuing to be the most active in terms of sales interest.”

The country’s climbing tourist arrivals also means that the market is attractive to investors seeking both rental income and also a holiday home.

“As we go further into 2017, occupancy rates for rental properties over the high season look good – albeit slightly lower than previous years,” says CBRE, “especially for pool villas, which seem to be like gold dust right now.”

3. Chinese appetite

As is the case in many of the world’s top real estate destinations, Chinese interest in Thai property is climbing. The country’s prominence on the global real estate scene has risen significantly in recent years, with JLL reporting a record $33 billion investment from China in overseas properties in 2016, up by more than 50 per cent year-on-year.

Thailand is one of the most sought-after locations for Chinese investors, thanks to the country’s appeal to middle-class and wealthy buyers. Indeed, Thailand’s lifestyle market has long been a favourite for high-net-worth individuals, but with Chinese property prices climbing, a growing number of middle-class buyers are looking to Thailand as a relatively affordable destination.

Juwai.com’s Southeast Asia Chinese Property Report ranked Thailand as the number one investment hotspot in the region for Chinese investors, citing its stable economy, lifestyle appeal and steady demand for rental property.

4. Developers looking abroad

Developers in Thailand are increasingly targeting overseas capital, particularly from China. That growing focus is expected to see international buyers step up their investment in Bangkok in the coming year, particularly in the city’s luxury sector.

National bank lending has also become more cautious, according to CBRE, which has meant that overseas companies are increasingly entering into partnerships with local developers. Research by Colliers reveals that Japanese co-ventures in Bangkok’s condo market, in particular, are becoming increasingly common.

5. High occupancy rates

While Thailand’s strong tourist sector fuels rental demand for residential homes, it also means that the country’s commercial property is increasingly attractive, particularly in the hospitality sector.

Hotels in Phuket, for example, achieved a record high third quarter occupancy rate at 76 per cent with a stable ADR, according to CBRE, and as a result, RevPAR improved by 8.7 per cent year-on-year.

Despite the low season, Phuket saw an increase in tourist arrivals and record high hotel occupancy. Chinese tourists made up a significant percentage of arrivals and “the number continues to grow”, notes CBRE.

“Investment appetite by both local and foreign investors in Thailand’s hospitality market has [shown] no signs of subsiding as these investors have remained upbeat on long-term fundamentals in this ever-resilient market,” says Mike Batchelor, managing director of investment sales in Asia for JLL.

In addition to Bangkok, hotel transactions also covered Pattaya, Phuket, Phang Nga, Koh Samui or more. Institutional investors from Hong Kong and Singapore accounted for 45 per cent of investment volume.

“Interest from both domestic and regional investors [was] strong in 2016,” says Batchelor, predicting that the trend will continue in 2017.

 

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