A good time for foreigners to buy Thailand property
The property market in Thailand has hit unprecedented times and a mood of uncertainty is hanging over investors. So should you be looking for a Thailand property for sale to foreigners at this time?
Though the Thai economy has been performing relatively well over the last few years it has had to navigate the rising value of the baht, an increasingly cautious world economy buffeted by the US/China trade war, and con-cerns over excessive debt levels.
The shock caused by the Covid19 pandemic, the subsequent closure of Thailand to international tourists, and the downturn in Thailand's major export markets has only made the environment more uncertain with current predic-tions for the economy contracting sharply by a record of 8% to 10% by the end of 2020.
Of course, Thailand is not the only country facing these overwhelming negative economic forces. So is it in fact a good time to look at buying property or land in Thailand, or not? Let's look at some of the pros and cons of the property market at this time.
Buying land in Thailand vs leasing
Foreigners are not allowed to own land in Thailand by law. If interested to buy property in Thailand, a foreign in-vestor has two options: either a 30-year leasehold of Thai property, or purchasing the property through a Thai limited company.
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Buying Property in Thailand
House price index
Thailand residential property price index (base-line of 100 in 2009) has fallen from 207 points to 204 points in one year, from Q1 of 2019 to Q1 of 2020, and has experienced a further fall to 196 in Q3 of 2020, which corresponds to a 1.5% drop every quarter over the last 7 quarters.
In fact, the index had started to diverge from its long-sustained growth trend starting in Q1 2018 with the rate of increase slowing from that time. So not such a good time to sell, but maybe a good time to buy?
Factors other than the Covid pandemic have led to this sustained drop in the property price index. Government measures had some success in late 2019, bringing the value of the baht down, but over recent months its value against its major trading partners' currencies has been rising again.
A property supply glut, particularly of condos in Bangkok and the Bank of Thailand’s strict new rules on mortgage approval have also taken their toll on the property market. The new land and building tax regulations which come in to effect this August 2020 are also making property investors, especially large investors, pause to consider the results of the new rules. In fact as these regulations will affect those investors with the biggest and multiple land holdings it could be these investors will want to divest of undeveloped land.
Due to economic uncertainty due to Covid 19 virus outbreak, international buyers are less interested, particularly those from Hong Kong and China. Strong capital growth in the Thai market had meant property purchases were seen by many investors as speculative and a good way to take advantage of fast profits rather than a long-term investment.
For now these short view investors are holding back from further purchases with some even keen to off-load and move-on. Analysts believe Chinese condo transfers in 2020 will be at least 25% down on recent averages.
If a client refuses to transfer, does not comply with the terms and conditions written in the sales and purchase agreement, and decides to release the property, their deposits are forfeited, but the good news is, these non-transferred units are often offered with a discount to new clients.
Some believe that the outbreak may bring opportunities for non-Chinese buyers and in the long-run, the Chinese may be looking for an overseas refuge in the event of these types of emergencies popping up again.
But all of these constraints on the market may in fact be an opportunity for the smart investor. The robust and sustained period of growth in property values in Thailand had seen the market favour sellers and now for the first time in a number of years some of the landlords, owners and developers are forced to accept lower profits or even losses. Discounts are available on anything from unsold developer stock, off-the-plan resale contracts, to existing condos and houses.
While condo prices in Bangkok and Phuket have been hit the hardest as developers reduce prices for much needed cash flow, prices on new build properties are holding quite well on Samui. This is due to the smaller stock available, compared to the larger cities, and because many investors believe Koh Samui is in a better position to bounce back from Covid restrictions.
Not surprising, given the downturn in tourism, many locally owned hotels have been hit hard. In fact, many brand new hotels build in prime locations are now market priced, aiming for a quick sale.
Long term rental yields in major centres, have been strong in recent years, ranging from 5.0% to 8.0% which was one of the reasons for the sustained growth in property values. Yields had risen more at the luxury end of the market, though since last year, they have fallen for the very large size properties due to increasing competition.
Like any investment market it is unclear how long this correction may continue or how low prices will go. But Thai-land, with its successful management of the Covid-19 outbreak, is in a strong position to recover from the wider economic effects of the pandemic.
So it could be that this market correction will be a short one and now is the time to buy into a market which, with-out a doubt, will rebound well once the world has conquered, or at least learned how to sidestep the Covid-19 virus. So, look around and bargain hard.
Contact our professional and experienced team now to receive information on the best available price reduced properties with up-to-date ROI estimates.
Note: The content of this article represents our professional opinion of the property market at the time of writ-ing and is based on publicly available data and discussion. Sunway Samui is not responsible for the consequenc-es of using these opinions when investing, such as losses associated with any subsequent property investment.
21.02.2021
