The South East Asian Property Market
If you have ever thought about investing in South East Asia (SEA), specifically in property, then this article will introduce you to Asia’s real estate potential.
As Europe struggles to recover from the financial crisis, SEA has been steaming ahead and the future outlook shows no signs of letting up any time soon. Capitalizing in Asia’s real estate market is one of the most solid ways to get a good return on investment, as many savvy investors are already finding out.
Reasons to Invest in Bangkok Real Estate
Investing in Thailand’s property market makes good sense, and there is no place with faster growth than the capital. Apart from being an exciting, thriving, cosmopolitan city, there are no signs of a slowdown in new condominium projects for 2014 and beyond.
Furthermore, Bangkok has achieved “The World’s Best City Award” for four consecutive years (2010-2013) by the publication “Travel and Leisure Magazine.” And in October 2013, in the annual Expat Explorer Survey, Thailand came top as the country which offers the best quality of life for expats. Without doubt, this is one of the most prosperous nations in the entire region.
Urbanization Driving South East Asia’s Housing Demand
More and more people are moving into cities with each passing year, especially in Asian countries, and that’s creating a huge demand for accommodation (see below):
- In the next 20 years, global urbanization is set to increase from 50% to 80%
- Most of this urbanization is happening in Asia (the world’s most populous continent)
- The demand for property in cities like Bangkok continues to increase to meet demand
- Investing in well located Bangkok Real Estate a wise move
As you can see, the forecast for the Asian region looks rosy and Thailand is no exception.
Ten Years of Real Estate Growth in Bangkok – 2003-2013
Investing in a buy-to-let property in Bangkok, or a property you want to live in yourself, will experience capital gains of approximately 4-5% annually over a 10 year period. In 2003 the average price for a luxury, Grade A property in Bangkok’s Sukhumvit road was just THB 60,000/ sqm (US$ 2,000/sqm).
Now in 2014, just 10 years on, the average price for the same properties is THB 120,000/sqm (US$ 4 000/ sqm). That’s a 100% increase in just a decade! These figures alone demonstrate the value of investing in Bangkok real estate.
Rental Returns of 10-11% on New Properties
However, there are other advantages to investing in Bangkok real estate, one of those being the rental returns. Back in 2003 it was easy to get rental returns of 10-11% even on brand new properties, however due to the expansion in the supply of condos for the Greater Bangkok area, and the rapid rise in property prices, returns are more like 5-6% in the current market for new properties bought at today’s prices.
Even so, this still easily trumps comparative rentals in other major capitals of the world, such as London, Sydney, New York, Paris, etc., which tend to see around 2-3% returns on newly acquired properties.
There will always be those more skeptical property investors who tend to think that Bangkok real estate is a risky business, not least because of the ongoing political instability the country has seen in recent years. But the fact remains that the coup of 2006, and then the massive Red and Yellow shirt demonstrations, have had little impact on real estate.
Thailand’s 2008 Condominium Act Amendments
The 1979, the Thailand Condominium Act (allowing foreigners to own a finite number of units outright) has not changed. In fact, the most recent amendment to this law (which occurred in 2008) actually increased the protection for alien investors, and therefore made condo purchases even less risky. It is no surprise then that 17% of condominium units in Bangkok are owned by foreign nationals.
The Upsurge in New Condominiums Projects
The other negative comment that is often made in regards to investing in Bangkok real estate is the recent increase in the supply of condominiums onto the market. It’s true, there has been an upsurge in the number of properties launched these past few years, but many of these developments have been sold out quite quickly to both foreign and local investors.
The Bangkok Rail Transit Network
The advent of Bangkok’s Mass Transit System (BTS Skytrain), and later the Metropolitan Rapid Transit (MRT Subway) dramatically changed the landscape and skyline of central Bangkok.
This transportation network has successful anchored the city to these lines, and needless to say that the vast majority of new Bangkok condominiums, apartments, and town houses have been built within close proximity to the BTS and MRT stations.
There was an obvious and unavoidable lag as local Thai people and expats adjusted to the new transport system, but we are now in the full swing of the ‘Skytrain generation’.
If you look for accommodation using a “Search by BTS and MRT” property finder, you will see that most new developments have sprung up within a 500m – 1km radius of a BTS or MRT station, with some others only a 50 – 100m walk away. There are also a few select properties that are actually linked to a station. It therefore goes without saying that these are the easiest and fastest properties to rent out or sell on, and it is only the mispricing of a minority of individual landlords above market prices that may lead to a delay in finding a suitable tenant of buyer.