Banking on Chinese Property Investors?

Bangkok’s Property Developers and Agents are bracing themselves for a quieter and more tepid market in 2019. Following years of growth and momentum, the Capital’s leading consultancies are forecasting a slow down in the general market.

Local Thai demand an important market usually driving new projects and resales, is slowing after years of relentless new launches and developments. On top of this, the tighter and more stringent mortgage lending regulations spearheaded by the Bank of Thailand (Effective 1st April 2019), will inevitably continue to curb local investment enthusiasm.

Growing reliance on International Investors

A reduced local market is encouraging growth-hungry developers, to strategically shift their sales and marketing focus on foreign investors. Developers have traditionally turned to overseas markets, such as Hong Kong, Singapore and Taiwan to drive international sales; interestingly, China with its hoards of cash rich investors is now on every developer’s radar. With several established developers notably Sansiri, Ananda and All Inspire already making forays into the country!

Opening the Gates for Investment?

This trend isn’t new, Chinese tourists are now the biggest demographic group to visit Thailand every year since 2011. The boom of Chinese tourists visiting and exploring Thailand, has inevitably led many to prospect and consider investing in the country’s real estate especially in Bangkok and coastal cities such as Pattaya and Phuket. The local slow-down, will inevitably reinforce Developers’ reliance on foreign investors and most notably Chinese Investors.

Property Insiders believe that this huge market has barely been scratched and Chinese money will play an important role going into 2019!

Why does Bangkok Real Estate appeal to Chinese investors?

China’s economy is flagging and forecast to slow to under 6.5 percent in 2019, this trend is led by several factors notably a global slowdown and tense Washington-Beijing trade relations. On top of this, individual Chinese investors are subject to capital controls and restriction on transfers, which could tighten further if the Yuan continues to devalue.

Despite these headwinds and uncertain economic environment, Bangkok real estate continues to appeal to Chinese investors for the following reasons:

1. Increased Exposure and Desirable Lifestyle

The recent Chinese tourism boom has provided exposure to the Thai Capital, highlighting the exciting and comfortable lifestyle it offers. Bangkok’s variety of entertainment venues, grand shopping malls, interesting culture and people are a big draw to Chinese investors.

In many ways, Bangkok is still perceived as an exotic and novel investment destination complemented by an appealing and desirable lifestyle.

2. Relative Affordability and Investment Appeal

Bangkok Condominium Projects between the ranges of 3-5 Million Baht tend to have the broadest appeal to Chinese buyers. This is because at that price level, Bangkok real estate offers relative affordability especially when compared to the sky-high prices of China’s first tier cities such as Beijing, Shanghai and Guangzhou.

On top of this, the Thai Capital has an active rental market driven mostly by its extensive expat community. Therefore, well-located projects can generate on-going and lucrative rental income; with condos in the Central Business District averaging gross rental yields of 4-6%.

3. Diversifying Risks and “Parking” Cash Overseas

The ongoing trade spat between China and the US, the devaluing Yuan and tougher controls by China’s government is creating uncertainty for Chinese investors. Many of which, are looking for ways to hedge their risks and diversify their investments.

Thailand’s comprehensive property ownership laws for foreigners, make Bangkok an appealing destination to “park” cash while the economic storm rages in China.

Is this investment trend sustainable?

Bangkok Real Estate community is evenly split on the future growth of Chinese demand.

On the one-side many forecast that this erratic demand, will falter if the Chinese economy continues to lose steam. Many skeptics are justifying their forecasts by point that Chinese Tourist arrivals in Thailand has dropped in 2018, primarily as a result of a weakening Yuan.

The more bullish Developers and Consultancies, believe that the current demand is only a small trickle compared to the potential deluge of Chinese buyers coming in 2019; and they maintain that Bangkok is still a relatively novel and fresh investment destination for cash rich Chinese investors!

The future of this trend is really anybody’s guess…

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The Editorial Team is made up of Property Professionals with years of experience in the Bangkok Property Industry. Articles and reports are drafted using first-hand experience and local expertise!

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