Despite some well-publicised concerns about the health of the property market in Thailand, the sector is very well-placed to get through a period of low economic growth than other sectors.
For instance, during the second quarter of 2015 both the manufacturing and agricultural sectors saw contractions while the construction and real estate sectors still registered growth.
According to the Economist Intelligence Unit (EIU), there are three factors are likely to support Thailand property prices and demand going forward.
First, property in Thailand still remains relatively cheap compared with other countries in the region. I’ve personally spoken to investors from Singapore who have opted to buy five Thailand properties for less than the cost of a single mid-range private property in the city-state. Elsewhere, according to Chinese overseas property website Juwai.com and as exclusively first reported early last month by Dot Property Group, its residential purchasing intent index for Chinese buyers looking to buy in Thailand rose by 180 percent year-on-year. Compare this to the average rise of 37 percent among the top five international countries, namely the United States, Australia, the United Kingdom, Canada and New Zealand.
The second factor is that although they are weakening, Thailand’s macroeconomic fundamentals do favour investment in land and property. A falling Thai baht is likely to boost demand for Thailand property purchases from overseas, and interest rates are low and not expected to rise significantly for years amid a massive output gap and high household debt. Energy prices which impact the cost of living in Thailand are also at historical lows.
Thirdly, there is a lack of high-yielding investment alternatives. Thailand’s domestic financial market is undergoing a downturn with the main index of the Stock Exchange of Thailand down 12 percent year-on-year as of mid-August. The manufacturing sector is suffering from overcapacity and, as a result, a lot of money is chasing the relatively stable returns of the housing market – according to the EIU. This money includes earnings from the informal economy which, according to the World Bank, is about half the size of the formal economy.
Promised government intervention that was announced earlier this week, whether it will benefit developers or end-user buyers or both, can only be good for Thailand’s property sector. So while negatives do exist, there are some extremely positive balancing facts that argue investing and buying in Thailand’s property market right now may not be a fundamentally poor investment at all.
