Most analysts feel it takes more than bombs to slow down the continued and long-term appeal of Thai properties for foreigners
On 17 August 2015, a bombing took place inside the Erawan Shrine at the Ratchaprasong intersection in Bangkok. Over 20 individuals died and countless more were injured. Some predicted the demise of Thai tourism and a dip in the real estate market. To date, tourism numbers are holding steady and real estate prices remain stable.
I believe the reason for this is the entry of ‘new money’ from foreigners who see value in Thailand real estate. In fact, compared to almost all major currencies, the Thai Baht has fallen as much as 12% since 19 July 2015 or a period of about 1 month. See Table 1.
In these times of uncertainty, buyers who were looking into the Thai real estate market already saw value before the market started its see-saw effect starting after mid-July. Now with effective exchange rates between 5% to 12% cheaper for foreign buyers and with the possibility of the Thai Baht becoming weaker, many buyers are waiting for the impending bottom before they enter.
At our Bangkok 101 Agency offices , buyers from the USA and Europe who have been waiting to buy either Summer/Vacation Homes or Retirement Homes predict that rates will be at their lowest sometime in the 4th Quarter of 2015. I predict that there will be a spike in sales of condominiums to foreigners towards the latter part of the year.
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In fact, some medium-scale developers by revenue, such as SC Asset is expecting a 71% growth of pre-sales and a 50% growth in core profit year-on-year. And net margins for SC Assets are expected to grow from 12% in Year 2014- 2015 to 15% for 2019.
When developers make money, it usually means markets are steady and signs are optimistic. But other developers who have a “think big” attitude such as Fragrant Development who was looking to build more than 9,000 units of condominiums in the next 2-3 years has revised its projections and scaled down its targets as “New” demand is not materializing.
Bangkok remains hot
New markets such as China and India have had their own economic difficulties in the past year and buyers there have a ‘wait-and-see” attitude before they venture into 2nd Tier markets such as Thailand. Traditionally, 1st entry markets such as London and New York still see steady inflow of Chinese and Indian buyers who see their condominium investments both as part of their investment portfolio and their holiday homes or second homes.
Bangkok remains the mainstay for investments into Thailand and apart from the expected bubble in the luxury condominium market, I expect we will have steady growth moving into the 1st quarter of next year. Most market indicators have predicted a slump in the Ultra Luxury and Luxury markets in Bangkok due to a lack of liquidity & lack of aggregate demand of real estate from abroad in general but again understanding this sector requires a little more intuition. I will come back to it in the next issue of Asian Property Review.
In conclusion, it will take more than a bomb to slow down the Bangkok property market. Non-institutional investors should study their exchange rates and take advantage of a prospective 10% -15% weakness in the Thai baht and jump in while the iron is hot. Most bankers do not see a drop in the Thai Baht beyond the 2nd quarter of 2016; and prospective buyers may miss the window of opportunity to enter the market with this exchange rate advantage.
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Vimol Kogar is a long term resident and Real Estate Advisor in the Thai Property market and is Principal at Bangkok 101 Agency . He can be contacted at bangkokhomes@hotmail. com or +66 816165987