Thailand’s capital is split between prime areas where prices are rising and a lower end suffering from reduced local demand
“Bangkok, like Las Vegas, sounds like a place where you make bad decisions”, the US film director Todd Phillips once said. Hedonistic Bangkok might have a dangerous reputation but it was the political chaos — which culminated in a military coup in May 2014 — that tarnished the city’s international image.
Investors overseas have been put off Bangkok because of the volatile political situation, says Tim Skevington, managing director of estate agent Landscope Thailand. When the army established military rule there was “a solution — albeit temporary, until we get elections again — that opened the gates for investors to look at the property market”.
More than 18 months later, “the land of a thousand smiles” is more stable, and in property at least, investors are sinking money into a city that is fast becoming an Asian business hub.
Investors are being spurred in part by the launch last year of the Asean Economic Community (AEC), a common market in which goods, services, skilled labour and capital are supposed to flow freely across Southeast Asia, a region that is home to more than 600m people and a potential market of $2.6tn.
Infrastructure investment is also a draw for businesses. Bangkok is increasing its mass-transit routes and there are plans for a 867km China-to-Thailand railway, potentially adding more than 2m Chinese tourists each year, according to the state-run China Daily.
High-end condominiums are rising along Bangkok’s neon skyline. Most popular among the well-heeled are the downtown areas of Sathorn, Silom, Sukhumvit and Lumpini, where huge monitor lizards stalk Lumpini Park, a rare stretch of grass, trees, and water.
Prime central areas are rising in price, says James Pitchon, executive director of CBRE Thailand. Properties are now selling for up to Bt300,000 ($8,421) per sq metre. CBRE is advertising a two-bedroom off-plan condo with a shared rooftop pool in Sukhumvit for Bt36.2m ($1m). Landscope, an affiliate of Christie’s International Real Estate, is selling a four-bedroom, four-bathroom penthouse apartment with floor-to-ceiling windows and skyline views in Sukhumvit for Bt136m.
A popular development is the MahaNakhon Tower, which, when completed later this year, will be Thailand’s tallest building at 1,030ft. The 77-floor, mixed-used development features 200 Ritz-Carlton Residences; 75 per cent of which have already sold off-plan. Apartments are priced from Bt45m ($1.2m) to more than Bt300m ($8.4m).
One of the city’s most expensive condominium blocks is Sansiri’s planned 98 Wireless, a development overlooking the US ambassador’s residence. Prices average at Bt550,000 per sq metre, and Sansiri is offering a starting price of Bt62m for a two-bedroom unit — due to be completed this year.
However, this is a tale of two cities; Thailand’s sluggish economy has resulted in a split property market. While year-on-year GDP growth reached 7.3 per cent in 2012, it fell to 2.8 per cent in 2013 and to 0.9 per cent in 2014, according to the Bank of Thailand. Bangkok’s high-end market remains bullish, but the lower end is struggling as banks tighten up their mortgage lending amid a risk of new-build oversupply.
“The local economy has not been doing too well, as agricultural prices are down, which affects exports and also manufacturing to some extent,” says Cobby Leathers, head of international marketing at Sansiri, one of Thailand’s largest residential property developers. “This lowers local demand, primarily for lower segments [of the market].”
At the top end, interest in Thailand has been sparked by measures introduced to cool property markets in Singapore and Hong Kong including higher stamp duty and raising downpayment requirements. Bangkok appeals as a geographically close but cheaper alternative. At an average of about 5 per cent, rental yields are high. And Thailand offers pristine beaches alongside a fast-paced city culture.
Foreigners may dream about living in a traditional Thai teakwood house but regulations restrict expats to buying condos (as they are not allowed to own land except under 30-year leases, sometimes with the option of renewal). Furthermore, in any condo building, only 49 per cent of the total space can be allocated to foreign buyers.
The majority of foreigners — largely from Hong Kong, Singapore and Taiwan — are cash buyers; money used to purchase property must come from overseas as a foreign currency, which effectively bars foreigners from borrowing locally. Mainland Chinese remain on the whole notably absent, preferring to invest in western cities.
Thai citizens make up roughly 80 per cent of condo purchases, according to CBRE. Traditionally, wealthy locals preferred detached houses with no one living on top of them — feet, which are considered dirty in Thailand, should not sit above heads.
Today, empty nesters and young professionals are forgoing such cultural concerns for convenience. “A large house in the suburbs is now quite hard work, whereas a condominium is quite convenient,” says Pitchon. “You can lock the door and it’s safe.”
That local demand underpins the top end of the market is a marker of confidence for the future. Wealthy Thai buyers tend to be “less fickle”, he adds. As he sees it, when natural disasters happen, or political chaos unfolds, local money “doesn’t run away”.
Buying guide
● Foreigners in Thailand cannot own land and can only live in houses as owners under a 30-year lease system
● Taxes can add up to 8 per cent of the total resale of a property, according to CBRE
● Bangkok’s temperature ranges from average lows of 21C in December to average highs of 35C in April, with a monsoon season from June to October
● Expats with work permits in Bangkok in 2015 totalled 80,994
What you can buy for . . .
$500,000 A two-bedroom condo in Thonglor, a popular residential district
$1m A three-bedroom condo in the mid-Sukhumvit area
$2m A three-bedroom condo in Sathorn
Clarissa Sebag-Montefiore – February 19, 2016
http://www.ft.com/cms/s/0/2b233f9c-d0b9-11e5-831d-09f7778e7377.html