Investing in Thai Property Market in 2011

Thailand has passed its turbulences in year 2010 which is considered one of the most difficult years in the Thai history as well as for businesses in all sectors. Surprisingly, despite the political turbulence, many huge deals were closed during 2010.  In fact, some property investment sales did hit the highest record.  This is an indication of high confidence in the property sector as investing in a property is a long term investment.

The property market is mainly categorized into 5 different sectors which includes: industrial, commercial, residential, retail and hospitality.  But when property is talked or discussed about, the general public will most likely perceive on the residential market or condominiums.

So, what about the property market in Thailand? Will prices go up in 2011?  Is there really scarcity of land? Is it equilibrium for the property market and what will happen in 2011?

We have so many questions on our minds. There is no doubt that prices of property along the BTS or MRT lines will increase continuously because of the limited amount of land and the high demand.  This is a scarcity amongst developers because these are considered the prime locations.  However in the future, should these lines expand, I believe that land along the extended lines would then become more attractive for developers. 

For year 2011 – the right defined statement would be “Certainty is uncertainty”. We should be ready to surf the changing wave if there is any!! We should plan for uncertainty and be ready to apply all strategies for each challenge and each circumstance.

Judging from the Q4, 2010, I would view the Thai property marketing in each sector for below for 2011.

Many key industrial estate developers were able to achieve their targets in 2010.  The overall industrial market seemed to have improved and growth is expected by 10% in 2011, especially in manufacturing, automobile and parts, electronics and IT businesses.  There are also more demand from foreign and local manufacturers for the expansion of industrial estates. The many concern for the industrial sector would be Environment Impact Assessment (EIA) and Health Impact Assessment (HIA).

The office market has improved slightly especially for Grade B office buildings because of the extended mass transit.  Many office buildings outside the CBD seem to attract interest from Tenants as well.  Within the CBD, many office buildings are adopting the trend of renovating their office buildings with a more modern look to retain existing tenants as well as attract new tenants. 
Where Regional Operating Headquarter (ROH) is concerned, no clear movement can be seen as yet but can expect to see results with 2011.  This year should be a brighter year for the office market. 

The overall residential market in 2010 mainly condominium was on the rise.  In 2011, this will rather be stable.  Condominium prices ranging between 80,000 – 120,000 baht per square meter will still be available within the city while on the outskirts prices would range between 50,000 – 75,000 baht per square meter.  Upper-end condominiums for foreign investment have slowed down because of the strong Thai currency there are still some investors who look for quality products at bargained prices.  This year we can expect for developers to gear their interest to building town houses or detached houses along the new mass transit extension lines.

The retail market has shown continuous improvement.  Local demand continue to grow strongly but for tourists, this might be a little hesitant because of the strong Thai currency.  There are many newly launched retail projects, for example supporting retail space in residential projects and community malls along the new mass transit lines.

Many big retailers and department stores are also adopting the trend to renovating / face lift / re-branding their stores to attract shoppers both in the capital and upcountry.  There are also a number of new shopping centers which is likely to be completed in 2011.

For hotels industry in 2011, we can expect that there will be approximately 1,662 new rooms for the upper scale and luxury hotel.  Hotel investors look for long term investment.  Please do not perceive this to be an oversupply because the expected payback period for hotel investors in between 10 – 12 years.  Hotel investors invest with an objective for capital gain in the future.  The low labor costs, low material costs and low import cost since 2010 are striving hotel investors to seize the opportunity for construction.

Like other businesses, the property market also has its life cycle. Certain properties within the main business and shopping areas are also starting to rejuvenate their assets such as properties within the Sam Yan area of Chulalongkorn University properties, Bangkok Bazaar and Langsuan of Crown Property Bureau, some old shop house projects along Sukhumvit Roads and other main roads.

Agricultural property sector
Nevertheless, there is another sector that the locals should look into as another choice of property investment.  This is the agricultural sector which is rather sensitive, complex and controversial with regards to property rights and cultural rights.  This is an opportunity for the local property investors and is a way for life’s sustainability as well.

Another major change in the Thai property market we look towards in 2011, is the possibility of leasehold extension that will encourage and assist Thai developers, Thai investors as well as foreign investors in their property investment.  This will also bring in foreign direct investment into the country.

Asian Economic Community in 2015
Looking a little bit further, the major change in 2015 would be the Asian Economic Community (AEC) which will positively impact the property market in all sectors as well as transportation and logistics. The high speed trains from China and the roads connecting countries will hugely benefit Thailand.  AEC will open up businesses amongst the Asian countries.  Geographically with Thailand in the center of many countries, Thailand will have a larger distribution channel.  The public may be scared of over supply of condominiums but once AEC is introduced this will no longer be on ‘over supply’ as we will have more demand for residential.  There will be a higher possibility and opportunities for Commercial, Industrial, Retail and Hospitality sectors as well..

Some of the property investment tips are:

  1. Aim for best price, high return with low risks

  2. Be well aware of the rules & regulations

  3. Select for good location

Use them wisely and they could make you rich. 

About the Author
Dr. Patima Jeerapaet is the Managing Director of Colliers International Thailand
Please feel free to drop your comments or questions to [email protected]

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