Analysis: Thailand’s property market landscape in post-Covid era
Marciano Birjmohun, Vice President of Business Development for Magnolia Quality Development Corporation Ltd, provides his market update results.
Living in Thailand since 2011, I have seen firsthand the exponential growth of infrastructure, tourism and real estate. No longer is Onnut is the last stop on the Sukhumvit line, but far extension into a neighboring province is possible. Following primary observations in the Real Estate sector come from my intrinsic involvement in this industry as executive and engagement on both sides of the value chain.
Post Covid…New Normal?
Covid has reconditioned our behavior and living habits indefinitely. Post Covid means larger living spaces, more privacy and a demand for projects that compliment individual lifestyles. The foreign market has always been attracted to the Thai real estate market, and Thailand is one of the few countries in the region that can offer a variety of property choices based on geographical preferences such as coastal, metropolitan or mountain areas. A unique value proposition that makes Thailand still one of the top destinations for real estate.
In post Covid, we have seen a notable shift in buyer behaviors from overseas, second homes and end-users dominate the scene in any region of the country. The uptake of premium assets with a higher grade of specifications, extended facilities, low density, limited units per floor, privacy and accessibility to primary and secondary necessities such as transportation, shopping centers, education and healthcare are high in demand. Perhaps one of the most appreciated demands have been in the housing sector (“Moobaan”) despite the absence of freehold ownership allocation for foreigners, this has not been a threshold for buyers and developers. Taking Phuket as example, where villas are acquired by foreigners through either a BVI structure (British Virgin Islands), Leasehold agreement or Thai company formation. A common practice that does not withhold foreigners to continue acquisitions in the foreseen future.
From a global perspective, Thailand still holds one of the lowest closing costs to acquire real estate. This is often overlooked during the project marketing pitch but worth mentioning again. Most importantly, these costs are uniform across the kingdom, making it comfortable for investors to make acquisitions in different provinces. Foreign buyers welcome Thailand’s closing cost structure with much enthusiasm.
The sentiment to acquire property as mean of investment vehicle is no longer the main objective, Covid teaches us that even established property markets CANNOT withstand this economic impact. Therefore, foreign buyers are now securing assets that provide their families long term security in the sense of generational living. Generational living is simply clarified where 2 or 3 generations life together in one household.
The condominium market
Buyers have become more sophisticated, in the capital Bangkok we have seen a healthy up take of units with larger living spaces; multiple bedrooms, extended facilities, better unit functionality and most of all privacy. The sophistication can be explained deeper, because post Covid buyers are willing to pay more to satisfy their needs.
From a developer perspective this is where service aptitude plays an important role. In short, this entails a developers’ ability to recognize opportunities to exceed customers’ expectations. Thailand is the land of smiles and when dealing with foreign buyers the high and low cultural context plays an important role in the communication. Developers that have bi-lingual sales teams tend to attract more successful foreign transactions than traditional companies.
So where does the foreign demand 2022 come from? Well, this is subjective to the ability of the sales team at each developer, but a few buyer groups have been notable:
- Overseas Chinese holding a foreign passport. Many Chinese families from Cambodia have been flocking the Thailand market to seek a better life for their families. Education, Healthcare and Infrastructure is one of the key drivers
- Myanmar, with ongoing political unrest, the Burmese have been the top-ranking buyers in the capital. With a variety in purchase power, both resales to newly build projects are of demand. Thailand provides them a safe haven not far from home
- The new money or “Nouveau Riche”, buyers who acquired their wealth within their own generation. Many of them are in the technology and venture capital space trying to secure assets that accommodate their aspirational lifestyle
- Expats have always been and remain an intrinsic part of the foreign sales quota, many of them have seen the transition and upgrade of Thailand’s real estate market. Enabling them to make sound decisions with a long-term objective
- From Russia with love, it has not gone unnoticed that the Russian Ruble has kept its strength in the last quarters of the year, benefiting the coastal locations such as Phuket, Pattaya and Hua Hin
B2C Relations – The Agent
The vast majority of foreign transactions are the result of agent efforts. For foreign buyers, new or not familiar to Thailand’s real estate landscape, agents are often the first point of contact and an essential part of Thailand’s real estate market. For many foreigners, the agents are not just a salesperson, but also their tour guide, translator, legal counsel, troubleshooter and most importantly a new friend.
The trust and dedication real estate agents provide foreign buyers cannot always be leveled on the developer side. Many agents go up and above to accommodate foreign buyers to their best ability, and most important they remain a consistent contact for years to come. This is not a trend, but a given fact that agents are the engine behind foreign transactions (note to developer).
Thailand going forward
Thailand has been raising its living standards for the better and despite skeptics the country remains a top destination. The residential sector has gone through a revolution, not only in asset class diversity but also strategic locations and architecture. Branded residences have made their entry a decade ago, placing Thailand in the spotlight for lifestyle-oriented investments – attracting a wealthy demographic.
Overseas markets have changed their property taxations drastically, but Thailand remains a consistent role model. Foreign buyers will diversify further away from the capital, and peripheral areas will see a growing demand from overseas.
Although still in early stage, developers will receive more demand from foreign buyers for sustainability and carbon neutrality in real estate. A good initiative that will strengthen the competitiveness level of Thailand’s real estate market going forward.