Economic recovery tempts foreigners back to Thailand
Foreign buyers are beginning to return to the property market in Thailand, but sentiment remains cautious compared with the enthusiasm shown before the global economic crisis three years ago.
Amous Lee Tarn-siong, international property investment director for consultancy Knight Frank, said the number of overseas homebuyers in Phuket - a hot spot for foreign investors who target holiday homes - was now 35 to 40 per cent lower than before the financial turmoil in 2008.
But this had already improved noticeably from a year ago when there was political unrest and violence in Bangkok, he added. Then, the number of overseas buyers was down about 55 per cent from their pre-financial crisis level.
'The confidence of foreign investors, including those from Hong Kong and the mainland, is slowly climbing,' he said.
Knight Frank recently hosted a two-day showcase in Hong Kong to promote Banyan Tree's luxury properties in Phuket, Bangkok, and other destinations in Asia. The broker sold five properties in Phuket and Bangkok for a total of US$9 million, which was two to three times better than its expectation of US$3 million to US$4 million. Three of the buyers were Hongkongers while the others were an expatriate and a mainlander.
James Pitchon, executive director of CB Richard Ellis Thailand, said the global financial turmoil drove a lot of foreign buyers away. Before the crisis, about 40 per cent of the homebuyers in Thailand were foreigners, he said, compared with 16 per cent now.
But he noted that, despite the decline, Thailand's property market was not significantly affected because domestic demand had been strong.
Britons remained the largest group of foreign homebuyers in Thailand, he said, making up about 10 per cent of overseas investors. Fewer than five per cent were from China.
Pornthipa Rayabsangduan, an equity analyst at Capital Nomura in Thailand, said four out of five customers of high-end property developer Raimon Land were foreigners before the financial crisis in 2008. Now, only one in five was an overseas buyer.
'That's because homebuying by Europeans has not yet rebounded to the pre-crisis level due to the depreciation of the euro and the fact that the economy has not yet fully recovered,' she said. 'We expect foreign demand to be flat this year, but it should grow again in the long term once the global economy fully recovers.'
Demand for residential property still benefited from Thailand's healthy gross domestic product growth and the improved political situation, she said. However, the sector has to contend with more negative factors such as interest rate rises, increases in construction material prices and labour costs.
Supply of new flats is expected to fall this year, due to the Bank of Thailand's cooling measures launched in November which set limits on the loan to value for condominium and housing purchases.
Pornthipa Rayabsangduan added that home prices in Thailand should jump five to seven per cent this year following the rise in costs for construction materials. But Dan Tantisunthorn, Jones Lang LaSalle's head of research in Thailand, said the country's high-end segment had been heavily reliant on demand from foreign buyers in the past.
'Until they return in significant numbers, upward pressure on prices is likely to be limited,' he said.
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Before the global financial crisis, 40 per cent of homebuyers in Thailand were foreigners. Now, they are estimated at: 16%