Commercial estate a leading market

Thailand’s commercial real estate sector has continued growth in Thailand’s tourism sector combined with economic recovery of its domestic market. The relatively competitive property prices and sufficient yields make Thailand continue to be an attractive market for investors.

Next to that Thailand is the leading market in hotel residences, accounting for 37% of total projects, followed by Indonesia with 22%, Vietnam at 18%, Malaysia and Philippines both with 9%, 3% for Singapore. The top three locations in the country for hotel residences are Phuket, Bangkok and Pattaya.

Residential uptake in the Metropolitan area

Bangkok is the economic center of the country’s investment and development, and has the most population in Thailand. Demand for homes close to the mass-transit system will still grow strong. More consumers will express interest in developments towards the city’s fringes, they still priorities locations close to BTS stations for the commuting convenience and relatively predictable commute times.

When the government starts to invest in infrastructure projects that will open up new land for property firms to develop residential projects. This will challenge property firms to invest in the new locations following the new mass-transit route from Bangkok to the suburbs.

Investment in infrastructure such as railway double-tracking, motorways, and 10 new mass-transit routes will make Thailand a regional transport hub after the Asean Economic Community goes into effect at the end of this month. This will boost demand to buy homes in Thailand, both in Bangkok and in the provinces, as foreign companies invest in Thailand as a gateway to other Asean countries.

The ratio Income and property prices remains a big issue for the majority of the locals. The fact is that most condominium units are priced beyond their budgets, which in turn is an indicator that the majority of condominium owners along the BTS lines do not rely on the Skytrain system for commuting, and that there remains plenty of unfulfilled demand in this market….which is slowly being taken up by foreign buyers with larger budgets.

Buy-to-let MUST grow in 2016

A key factor for investment is to receive yield and/or capital gain. Looking at other prime cities such as Singapore, London and New York, long term buy-to-let programs are self-evident. Agencies in Thailand are trying to fill up those gaps by aggressively renting out units at any price level, many times disadvantaging the owners. By not screening their tenants accordingly, this often results in short term lease and early contract terminations.

In 2015, the average gross rental yield (before expenses and taxes) for Bangkok downtown condominiums was approximately 4.8 %, a drop from 5.4 % in the previous year.

This decline is underpinned by a price increase of new condominiums that exceeded the growth in rents. The good news is that the number of expatriates in Bangkok has increased by 10 % year on year. The expatriate market is the key rental market for high-end and luxury downtown condominiums. Two- and three-bedroom condominiums are the most popular types of unit rented by expatriates, while demand for one-bedroom units and studios is limited, except in serviced apartments.