Peaceful Election Heralds Return of Confidence in Thai Property Market
After several years’ uncertainty in the Thai property market, the peaceful transfer of power following July’s General Election has led to a renewal of interest from international investors. Previously, market uncertainty was generated by years of turmoil which witnessed a military coup, the closure of the main airport, mass street protests and political bloodshed.
However the landslide victory of the populist Pheua Thai Party of Yingluck Shinawatra and equally importantly, the former Prime Minister Abhisit Vejjajiva’s announcement that his party is prepared for a period of opposition has resulted in rising hopes for political stability and increasingly conducive conditions for business.
Within just six weeks of the election, there were signs that the big institutional investors had been playing a wait-and-see game on the outcome of the election before announcing new property deals in the Kingdom.
Longlom Bunnag, the chairman of the Thai division of global property heavyweights Jones Lang LaSalle, reported that the company were in the process of negotiating a number of separate deals worth a combined THB 5B (US$ 167M). These included the purchase of two Bangkok office buildings on behalf of major investment banks and a hotel investment in Phuket. According to Mr Bunnag, Jones Lang La Salle’s clients were based in Singapore and Hong Kong and they believed the election was good for the Thai property market offering the prospect of excellent yields on investment.
The property market in Pattaya is likely to see increasing attention from international investors. The city’s economy is currently booming on the back of increasing tourist numbers. The city has long been a popular destination for visitors from the western world as well as Singapore, Japan and the United States and while tourist numbers from these countries remain strong, they are now being joined by increasing numbers from Russia, China, India and the Middle East.
The Tourist Authority of Thailand (TAT) believes 2011 will see record numbers of visitors from China and India as those country’s rapidly growing middle classes acquire a taste for overseas holidays. Following quickly on the heels of the tourists is incoming investment as overseas entrepreneurs and investors seek to profit from providing facilities for their nationals in Thailand.
One aspect of first time tourists that will please TAT is that many of the visitors are at the high end of the market and will be injecting serious cash into Pattaya’s economy. According to the managing director of global property consultants Colliers International, Patima Jeerapaet, some high-end resorts in Pattaya are reporting occupancy rates of up to 95% indicating that investment in five-star facilities offers the potential for good returns.
Investors are also hoping that Prime Minister Yingluck Shinawatra’s long experience in the real estate market will prove to be a massive benefit to investors and remove some of the long standing disincentives to foreign investment in the Thai property market.
Insufficient in-country financing options for overseas investors, structural restrictions on foreign ownership and the limited period of leasehold have long been identified as obstacles to increasing foreign investment in property in Thailand. If these difficulties were alleviated it would certainly result in a massive capital inflow into the country.