Owning a property in a location with warm tropical breezes, sandy beaches, blue skies and hot sunny days, a dream for thousands of people for many years. In Thailand, realizing this dream has now become a reality for many people from all over the world. The country’s open and encouraging attitude towards foreign investment has transformed many areas throughout the kingdom, and many a foreign investor has reaped the rewards.
In recent years there has been a veritable flood of investment from overseas. This has brought industry, technology and jobs to the country. It has raised living standards, improved road and other transport links, and transformed the kingdom into a truly multi-cultural society.
1979, The Kingdom Looks to the Future
Historically, Thailand has fiercely defended its sovereign right to maintain indigenous ownership of land. For many years, foreigners have been allowed to own a property, but they have never been allowed to own outright the land on which it sits. (There is one exception to his rule). Purchasing land with a Thai partner on which to build a property has always been an option. This is common, but problems will arise should there be a breakdown in the partnership, with very little recourse in law for a foreign national.
This policy held the country back in attracting foreign investment, until 1979. It was in 1979 that the Thai government introduced the Condominium Act. The act stated that a foreigner can own outright a condominium unit solely in their own name. From that moment on, the investment and building boom began, and is still in great evidence today.
The Exception That Allows Foreign Ownership of Land
There is one exception to a foreigner owning land in their own name. A foreign investor can make a land acquisition not exceeding 1 rai in area (1600 square meters) and with a minimum investment of 40 million Baht, and the investment can only be for personal residential purposes. So, it is possible to purchase land in the name of a foreigner, but it is restrictive, and quite obviously, only for the wealthier investor.
High Density Population and Foreign Investment
There has always been a small number of properties built by foreigners in rural areas, usually as the outcome of a marriage partnership with a native Thai. However, within the big picture of foreign investment, the total value of these investments is somewhat negligible. The billions of Baht that has been invested by foreigners has been concentrated in traditionally popular areas, the capital and areas with high tourist numbers. Bangkok and Pattaya were, and still are, major benefactors of the building and investment boom.
Since 1979, these two cities have been transformed beyond belief. High rise concrete, steel and glass now dominate the skylines. Both cities now have a high level of foreign residents, tourists, workers and retirees. The increase in population has fed an expansion in the peripheral infrastructure to support it. Service trades, retail and the leisure industry have all benefited.
This, in turn, has supported the traditional Thai migratory working population. Every year, thousands of Thais migrate to the densely populated areas to seek work. Work within traditional Thai sectors has largely given way to that of internationally recognized trading brands. In the high streets and glitzy shopping malls, fashion, coffee shops, bars and restaurants are now the mainstay for migratory workers.
The changing levels of population in these cities give a clue to the future popularity, and thus prosperity, of these conurbations. In the year 2000 Bangkok’s population was 6.4 million, today it stands at 10.3 million and is projected to reach 12.1 million by the year 2030. These figures show that Bangkok is, and will remain an attractive center for business and commerce which appeals to foreign investors. And so, the building boom will continue.
The current level of investment in building residential properties is still maintaining a marginal over supply. This is good news for anyone looking to purchase a condo in the city as prices remain very competitive. However, anyone considering a buy to let property must bear in mind that the over supply also keeps rental values at comparable levels.
The situation in Pattaya paints a very different picture. In 2005 the registered population was around 95,000, in 2017 it was 107,400. This year the population has dropped to 103,400, and the registered population is projected to continue falling for at least the next five years.
The result of the lack of population growth can be seen in the property market, there is now a sever glut of residential properties, condominiums in particular. The resale market has been hit the hardest and is now virtually stagnant. Properties are either being drastically reduced in price, or remaining on the market for years awaiting a buyer.
It should be noted that the population figures do not include the vast numbers of non-registered migratory workers. This figure is almost impossible to ascertain and is constantly fluctuating, this is largely linked to tourism and will change along with the number of visitors to an area.
The fate of these two most popular mainland locations appear to be very different. Bangkok will continue to grow, and the moderate over supply of residential property shows no signs of abating. This will keep purchase prices competitive for the foreseeable future. But capital growth and rental yields will be at the mid to lower end of expectations. Although the high levels of growth and yield once enjoyed in the capital are unlikely to return, Bangkok still looks attractive as a location that offers a stable investment.
It may not be possible to say the same about Pattaya. Pattaya has relied, almost exclusively, on tourism for its prosperity for the last 50 years. Now the city has lost a great deal of its shine for tourists as they eye other locations in which to holiday, and spend their money.
The effect on the city’s property market is undeniable. Capital growth has stagnated, rental yields are poor and hundreds of properties remain unsold or unlet. As the local economy declines, so does the level of investment. Less money is being put back into the maintenance of existing properties, thus they deteriorate. Fewer high-end, new properties are being developed, all this mirrors the decline in the city’s appeal to foreigners.
Sadly, there are no pointers that indicate that there will be any significant improvement in the near future. However, if you love Pattaya, want a bargain in which to live out your dotage, then it may now be just the ticket for you. On the other hand, the investor could do well to avoid Pattaya and seek a far more attractive investment in one of the many other beautiful areas of the country.
The Northern Beauty of Thailand and Investment
The North of the kingdom has undeniable beauty, in particular Chiang Mai and Chiang Rai. Chiang Mai, as the larger of the two cities, has been popular with retirees and tourists for some years. More recently, the city has attracted a number of western companies that can trade remotely. This is largely because the business overheads are less financially burdensome, and it is attractive to many foreign workers due to its cheaper, and less hectic, way of life.
Steady investment has seen many property developments across the spectrum of quality. Low, mid and high-end properties can now be found throughout the city. Investors can expect capital growth of around 3.5%-4% and rental yields between 4%-4.5%. Chiang Mai is unlikely to ever become exploited to the degree that Bangkok has, but is likely to sustain the current level of investment for at least the foreseeable future.
There is one undeniable aspect of Chiang Mai which, it may be said, has held the city back in attracting more investors, the problem of air quality. Every year the city suffers from what is known as the ‘Burning Season’. During the months of February, March and April the air quality plummets. Farmers burn stubble in the fields, forest areas are burnt to clear land for cash crops, and undergrowth is burnt is accommodate the growing of valuable mushrooms, or to trap wild boar.
During this period the beautiful mountains that overlook the city become invisible due to the level of smog. The surrounding mountains hold the smog over the city, and until the rains start the air quality is very bad, to the point of being hazardous to health. People with allergies or respiratory problems will find Chiang Mai somewhat uncomfortable during the burning season.
This year the Chiang Mai government put a ban on burning from the beginning of April until the end of March. In reality, this had little effect, and burning was still occurring, reducing air quality to dangerous levels. As for the future, residents and prospective investors can live in hope that burning bans will, not only continue to be implemented, but also enforced vigorously. But hope must be balanced with realism. The burning bans seem to be nothing more than paying lip service to the problem. Realistically, there are no signs that the local authorities have any real enthusiasm to stamp out the practice.
A little further North is Chiang Rai. This smaller, border city also suffers poor air quality during the burning season, but not to the same degree as Chiang Mai. The city doesn’t attract the same level of foreign companies investing in the area, thus there are fewer foreign residents. There is a degree of residential development as the city does have some attraction for foreign retirees and tourists. Tourists see the city as an ideal stop off, or base, for touring the region.
The city is part of the infamous ‘Golden Triangle’ and offers easy access to Laos and Myanmar which makes it popular with backpackers. The cities geographical location is not going to change, and so, low rental basic accommodation will remain in demand. Relatively low property prices will maintain the interest of foreign investors, particularly retirees, but there is unlikely to ever be a boom in the property market.
Chiang Rai seems to be a location where some retirees are enjoying their senior years whilst also, having invested in, are earning a rental income from low level rental accommodation aimed at the transient market. The city will, overall, remain steady in respect of capital growth and rental income, at the low to mid-level of returns. For investors that wish to retire, are happy with a lower level rental income, or choose to combine both, then Chiang Rai could be the perfect location.
Island Investment Within the Kingdom
When we give thought to the way Thailand’s foreign investment has altered the kingdom, thoughts initially tend to fall upon the popular mainland tourist areas, such as Bangkok and Pattaya. But Thailand also has hundreds of islands, and over the years, foreign investment has also changed the landscape of the most popular island destinations.
There are dozens of small un-spoilt islands where investment is profitable, but opportunities are limited. Looking to the future, local island administrations are likely to try to maintain this status quo as they look at the lessons learnt from Koh Phi Phi. This is the paradise island that was tragically wiped out in the December 2004 tsunami.
Following the tsunami, Koh Phi Phi was rebuilt, with little concern to its natural beauty. Now it is over developed, beaches are often polluted, and the overall scene is one of a party island that’s out of control. Looking ahead, it would appear the island is heading the same way as mainland Pattaya. It will lose its shine and appeal, which will affect the property market. Investment will fall, capital growth will flat line and rental yields will be negligible.
Although investment opportunities are not plentiful, there are a number of un-spoilt islands which are very attractive for investors. In particular, the islands of: Mak; Jum; Chang; Adang and Lanta. These locations have strict local restrictions on building and expansion, which not only help to preserve their peaceful beauty, but keeps returns on property investment in the higher levels of expectations. Capital growth and rental yields should both continue above 5% for the foreseeable future.
Investors have always looked for a balance between capital investment and potential returns. Those searching for an island investment have rarely been disappointed with two of the country’s larger islands, Phuket and Samui. They straddle Thailand’s Southwestern leg, with Phuket in the Andaman Sea and Samui in the Gulf of Thailand.
Both Phuket and Samui have broad offerings for potential investors. There is natural beauty aplenty. Their rain forested hills, with all their beauty, are protected with National Park status. Beautiful beaches with active and passive leisure facilities have always made these islands popular with tourists and foreign retirees.
These two locations seem to have found the balance between preservation and profit. With no plans to alter their successful policies, the future looks positive for potential investors. Quality, sympathetic developments continue on the islands at a rate which doesn’t create a glut. This is good news, capital growth and rental returns will remain firmly in the mid to high end of potential, and, unlike so many other areas, the re-sale market will stay vibrant for long into the future.
Although the islands may look like the most profitable option for property investment, it’s not everyone’s first choice, due to varying degrees of isolation. This maybe because investors want, or need, access to other locations on the mainland, or because administering a rental property on an island is slightly more problematic. For the most part, property investment on mainland Thailand has levelled or flat lined, which has negatively affected returns. So, new markets are being sought by developers and investors.
Under developed areas, quite obviously, want to encourage outside investment to improve their local economy. But there is now more public awareness about the importance of preserving local environments. Corporate profit can no longer be the ‘Be all and end all’ of a development project. Future projects need to go hand in hand with the local in which it will exist.
Preserving the esthetics and the natural environment are as important to conscientious investors as is profitability. This modern, progressive thinking has started to play a part in the planning of future projects, and will continue to evolve for years to come. This enlightened approach will be good news for developers and investors alike.
The digital world in which we now live is permitting more and more people to work remotely. This is already starting to have an effect on the demographics of the country. Workers living in the kingdom can now live side by side with retirees and tourists, allowing them to work in a more relaxed and pleasurable environment.
For lots of workers, the daily trudge through a city’s rush hour is no longer a prerequisite of working in Thailand. Working from home is a growing trend which can only increase as more companies and workers see the benefit of having, and being part of, a remote workforce. For developers of quality projects in desirable locations this is good news, as more workers choose to reap the benefits of exiting the city.
So, on the mainland, where is the future looking bright for prospective investors, developers and the environment? Although the building onslaught in Bangkok continues unabated, some progressive thinkers have started casting their eye further afield. One such place is Pranburi. Southwest of Bangkok, and just 30 kilometers from Hua Hin, Pranburi is an un-spoilt area with natural beauty abound. With a beautiful coastline along The Gulf of Thailand this is the perfect location in which to retire, work or to visit for a holiday.
New investment opportunities are opening up in Pranburi. Projects are strictly controlled by local regulations designed to preserve the beauty of the area as well as the sustainability of these developments for the future prosperity of the district. There will be no over exploitation of the district, with the number of new projects carefully limited. There will be no high-rise monstrosities blighting the coastline. The future for Pranburi is one of exquisite, quality living built on sound, sustainable economic planning and design.
New developments are now underway with prices from as little as 2.5 million Baht. There are significant off plan discounts being offered, full legal and translation services for investors. Owners of units will be able to benefit from full on-site management and maintenance services. Whether an investor lives in, or rents out their property, they can be sure that their investment is being taken care of.
Investors have wondered if the heady days of 8% capital growth and 8.5% rental yields will ever return. Although across the country, steady, mid-range returns are probably the best an investor can expect, Pranburi looks as though it is about to buck the trend. Realistic projections are for returns to be around 8%, and with serious discounts being offered for buying off plan, capital growth could well set new levels of profitability.
There is one development in Pranburi which seems to stand head and shoulders above the rest. It is a truly unique project designed specifically for quality living. The architects and designers have created an all-encompassing living style ideal for tourists, retirees and workers. Not only is it a development of residential units, but there are supporting leisure and retail facilities.
If that wasn’t enough, this project also includes its own private marina which skirts along the front the residential area. The marina is connected to The Gulf of Thailand via its own, exclusively accessed, canal. This comprehensive, yet intimate, residential development has no equal anywhere in the kingdom.
With a low-level entry investment, high quality living and returns which are set to outstrip national trends, this is an investment opportunity not to be missed. Not only will this project offer excellent returns long into the future, but resale, should it be desired, is unlikely to be a problem due to the location and the desirability of this style of living.
This project really must be seen by all potential investors, and it can be, by visiting Grand Marina Pranburi. This is a project that is setting new standards of development and living for the future of Thailand and property investors.
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