The Thai real estate market is decidedly split. In general, buyers are increasingly constrained and finding it difficult to fund or finance purchases. The average Thai is being held back due to persistent slow economic growth and high levels of consumer debt. However, in the centre of Bangkok and at the high end, the story is very different. Demand remains firm, new stock is being taken up nearly as fast as it is offered, and prices are rising to record levels. The market is bifurcated, with the lower end lagging and the upper end forging ahead.

Economic sluggishness and political instability have weighed on sentiment and budgets, so the split can largely be attributed to imbalances and lack of confidence. However, as uncertainty following the 2014 coup was short-lived, and as the new government focused on promoting economic growth, international investors very quickly went from sceptical to enthusiastic about Thai property. The turnaround has been pronounced. Thailand has transformed in a few quarters from a country with a mildly interesting, basically healthy real estate market to a leading target for global property investors and potential residents. It is also increasingly regarded as the new centre of the ASEAN Economic Community (AEC), with apartments and offices being taken up by those who seek to establish themselves in what may become the region’s hub.

Low-End Blues

In Bangkok the average unit price for new condominiums has been rising steadily, from BT64,000 ($1800) per sq metre in the first quarter of 2014 to BT144,500 ($4070) in the fourth quarter of 2016, according to Colliers International. The Bank of Thailand Condominium Index hit 173.6 in December 2016, up 7.9% year-on-year (y-o-y) and from 100 in January 2009. However, these increases have meant that fewer affordable apartments have been available. Condominiums offered for less than BT50,000 per sq metre ($1410) vanished from the market by the end of 2016, with a rising flow of units above BT250,000 ($7040) per sq metre entering the market.

At the same time, Thai consumers have been less able to afford property and less inclined to take a gamble on it. With GDP growth going negative three times since 2008 and the rate stuck under 5% since 2012 in the context of protests, the coup and weak growth internationally, many Thai consumers lack the will or the way to buy in. And with household debt now above 70% of GDP – up from around 45% in 2008 – financing has been difficult. Mortgage rejections are in part responsible for the lack of demand.


According to Colliers, 39,050 condominiums were introduced onto the market in Bangkok in 2016, up 13% y-o-y. A total of 16,000 hit the market in the fourth quarter alone, the highest level in at least two years. The third quarter was unusually subdued given the passing of His Majesty King Bhumibol Adulyadej in late 2016, with marketing activities cancelled for the mourning period. Colliers notes that the weak demand at lower price points was in part due to the fact that so much activity had taken place in that range in recent years. The company adds that the average price for condos being sold is at the highest level since at least 2014, with the majority of launches in the BT100,000 ($2820) to BT150,000 ($4230) range in the last quarter of 2016.

Outside the centre of Bangkok imbalances exist as well. Too many units have been built while more supply is coming from sales in the secondary market. The overhang cannot be cleared easily given the recent economic conditions in Thailand and the slowdown of some foreign economies, especially Russia. Even prime secondary markets, such as Phuket and Hua Hin, are facing weakness. In the first three quarters of 2016 no new projects were launched in Phuket.

On that island demand from Chinese buyers is still strong, but purchases by Russians have slowed considerably despite a recovery in arrivals from that country, while sales by Western owners in Phuket are on the increase. The glut in that market is substantial, with an estimated 2000 condo units and 200 houses failing to sell in 2015, according to the Phuket Real Estate Association. Especially hard hit is the market for very high-end property, such as luxury villas that are priced above BT100m ($2.8m).

Countering these negative trends in some of the more established destinations outside Bangkok is the development of other secondary cities and outlying regions. With international travellers and investors going further afield, and Thais starting to better appreciate the potential of these areas, increased activity and strong demand are being witnessed. Locations mentioned by professionals include Chiang Mai, Chiang Rai and Khao Yai, where demand has been seen for everything from low-end condominiums to stand-alone houses. The development of infrastructure has helped considerably. However, as in other areas, overbuilding is becoming a problem, while in Khao Yai inspection of property rights by officials in 2014 and 2015 has resulted in a number of projects being stalled.

Observers express optimism regarding Phuket. With the authorities undertaking a crackdown on petty crime and corruption, and with an increase in security, the environment and image of the province could be boosted. Development work undertaken at Phuket International Airport may also help.

Developing Dynamics

As the mass market faces limited buying capacity and a degree of overbuilding, some see significant opportunities and are making sizeable investments in this segment.

Bangkok is growing in ways similar to other Asian cities in the past, and the right sort of buildings need to be there to accommodate the changes. The capital is evolving and breaking out of its traditional dynamic of low-grade sprawl and a relative insensitivity to commuting times. Japanese companies are particularly active in this respect. As Bangkok’s mass transit system develops and Thais become more career focused, residents are starting to live more like people in Tokyo. They need efficient, centrally located housing that is close to stations. Bangkok’s BTS Skytrain and mass rapid transit system have been growing consistently over time and continue to expand, with construction on at least three new lines, the Pink, Yellow and Orange, expected to commence in 2017.

Japanese real estate company Mitsubishi Estate set up a joint venture (JV) with AP Thailand in 2014 as the Japanese company continued to expand into the markets of South-east Asia. It said that it had confidence in the country and its capital city, even at the height of the political crisis. The JV was undertaken not only for financial support but also for the technology transfer opportunities that it offers.

Japan’s Mistui Fudosan and Thai developer Ananda have been working together since 2013, developing condominium projects. The JV was extended for another two years in 2015 to add five more projects to the initial four. Sites chosen are situated near newly developed subway or elevated rail lines. Other JVs involving Asian players include Japan’s Hankyu Real Estate with Sena Development, Japanese Shinwa Group with Woraluk Property and Hong Kong Land with Singha Estate.

High End

Despite the inconsistent performance in the mass market, high-end property has done exceptionally well, with prices hitting record levels (see analysis). The turnaround has come as a surprise. Weak economic performance and political instability were seen as taking a toll, the expectation being that local buyers would become more conservative and international buyers more cautious. However, the opposite happened; wealthy Thais have poured cash into high-end condominiums while Bangkok has become a destination of choice for foreign investors.

There has been a distinct shift in demand on the part of local buyers. Wealthy Thais have started to move from upscale suburban locations to the centre of Bangkok. The city is not only the economic centre of Thailand, but it also seen as having the best hospitals and restaurants in the country. At the same time, local customers are becoming increasingly discerning, and more critical in terms of the materials being used and the fittings being offered in new structures.

“The real estate market is heavily correlated with the credit cycle and at present, with household debt reaching relatively high levels and mid-to-low end developments presenting sizeable risk, the majority of developers are focusing on the spectrum of the market where purchasing power remains strong,” Ishmit Bajaj, managing director of Lucky Living, told OBG.

By early 2016 international investors were starting to recognise that Bangkok has become a preferred location in the region. This flip in perception coincided with the formal beginnings of the AEC. The change in sentiment is so pronounced that some developers are sensing a major transformation in regional dynamics, with Thailand going from a large but secondary ASEAN player to a hub and an alternative to Singapore.

While Thailand has generally trailed its neighbours in terms of legal underpinnings and consistency of administration, it has led in other respects, such as costs, quality of life, nature and local culture. It is also well situated in the Mekong region, which is increasingly regarded as the centre of growth in ASEAN.

As stability is maintained, and as the country moves closer to international best practices in terms of taxation and corporate structuring, it becomes increasingly difficult not to be located in Bangkok for those who are active in the AEC. “As more foreign property buyers converge on Bangkok, developers are straining to accommodate demand due to strict laws mandating a maximum of 49% foreign ownership within condominiums,” Kajonsit Singsansern, managing director of developer Siamese Asset, told OBG.

Investor Sentiment

Developers of high-end properties have taken to holding regular roadshows in major global cities. Target locations include Hong Kong, Singapore and Japan. Rental yields in the capital are still high – for some properties in the 7-8% range – making the market attractive in a world of low yields. Strong interest is seen from Chinese buyers, which includes those from Singapore, Hong Kong and mainland China. They are attracted to the country because it is a good place for retirement or second homes, and because properties there generate relatively high investment returns. The price points in Thailand are also lower than similar units in China, while the market is seen as one of the most stable in the region.

However, investors have started to become more discerning in recent years. While yields are still relatively good, they have been on a downward trend. As a result, investors are looking into the quality of the yields, the cost of managing a property and the mechanics of renting out units owned. Because flipping is no longer as easy as it once was, some investors are looking at older properties, as they are cheaper on a square-metre basis and can offer higher yields.

As a sign of the strength of the market in the centre of Bangkok, two major embassies are selling their properties, the British Embassy on Wireless Road and the Australian Embassy on South Sathorn Road. Both are in prime locations and are being unloaded by governments seeking inflows into their national coffers.

Regulatory Change

The government plans to amend laws that restrict land leases held by foreign interests. At present, leases for residential development are limited to 30 years (though industrial leases can be 50 years in length), and the hope is to take that to 50 years. The change is expected to boost the property market and make large tracts of land now held by the government more attractive to international parties. For most, 30 years is not long enough to commit to sizeable developments.

In addition to relaxing land leases to foreigners, a land and buildings tax is in the works. The levy will be on all properties valued above a certain level – expected to be BT50m ($1.4m) – with a higher rate, and an increasing rate, on vacant land. According to local media, the tax is expected to be 0.2% for agricultural land, 0.5% for residential and 1.5% for industrial property valued at more than BT30m ($845,000). Vacant land will attract a 5% rate in the first three years, doubling to 10% in the following three years. It is expected that the price of land will fall once the tax is introduced, with some industry executives saying that the decline could be as much as 10% in 2017. Holders of large land banks are going to have to sell in order to pay the tax, they argue, and this will exert a downward pressure on prices.

Office Space

In the office segment, demand for grade-A space continues to increase as supply grows. However, new offerings are not keeping up, and as a result the vacancy rate has been dropping. That trend is set to continue. The overall vacancy rate has fallen from around 15% in 2008 to 7.7% in the fourth quarter of 2016. Pricing has been firm, with rents for grade-A space rising 6.3% y-o-y in the central business district (CBD) in the fourth quarter of 2016, according to real estate consultancy CBRE. In the CBD the vacancy rate stood at 8.4%, while the grade-A vacancy rate reached 7.6%. Overall, the vacancy rate for grade-A office space was at 3.6% in the fourth quarter of 2016.

Few new offices will be built in the CBD in the near future, while office buildings being completed tend to be on the smaller side. Condominium projects usually get the larger tracts available. However, 2m sq metres of office space are in the planning stages, 463,000 sq metres of which is coming onto the market between 2017 and 2019, according to CBRE.

New projects include the BT3bn ($86m) Gaysorn Tower in Ratchaprasong, to be completed in 2017, Singha Complex at the Asoke Montri–Phetchaburi intersection, to finish in 2018, and Samyan Mitrtown on Phayathai Road, set for completion in 2019.

According to CBRE, as of the fourth quarter of 2016 two buildings in the city were achieving rents above BT1000 ($28.20) per sq metre per month: Park Ventures in Ploenchit, which was completed in 2011, and Bhiraj Tower at EmQuartier, at Phrom Phong and completed in 2015. The average CBD grade-A office runs for BT953 ($26.90) per sq metre per month. For grade-A outside the city centre, the rate is BT770 ($21.70).

Rates have increased significantly in recent years, with grade-A CBD prices rising from the BT700 ($19.70) range around 2010, while non-CDB properties are up from about BT550 ($15.50).

While prices have increased, demand is expected to remain firm, largely due to high prices elsewhere. The cost of Bangkok office space is still highly competitive on a global basis. In a survey of costs, CBRE ranked Bangkok 109th of 126 major markets in 2016. Hong Kong, where office rents are 10 times those in the Bangkok CBD, was the most expensive office market in 2016, followed by London and Beijing.

Retail Capacity

In retail, supply has also been limited. In 2016 only around 119,000 sq metres of space came onto the market, the lowest in many years, according to Colliers International’s fourth quarter 2016 report on Bangkok. Total retail supply was up by just 1.8%. Due to uncertain economic conditions, projects were cancelled and postponed. Most of the capacity coming into the market in recent years has been community mall related, with larger malls scheduled to be completed in 2017 and 2018. More than 700,000 sq metres of space is expected to hit the market in that two-year period.

Supermarkets are a new growth area, with major players, such as Foodland and Villa Market, continuing to expand and large groups, such as the Mall Group and Central, investing in the segment.

International interest remains strong in the hotel market. As tourist numbers continue to break records, reaching an estimated 35m in 2017, investors see hotels as a good way to capture the growth. “Thailand’s hospitality segment is currently being stimulated by strong growth in tourism indicators, as 2015 and 2016 were the first years in quite some time during which no major social, political or environmental shocks negatively impacted the sector in a significant way,” Krit Srichawla, CEO of Fico Corporation, told OBG.

Capital is coming from local and international interests, with Asian corporations in particular regarding the sector as a good target for their reserves.

“In the hospitality segment there are opportunities all across the globe, but emerging markets inherently hold more potential,” Nishant Grover, chief operating officer at TCC Land Asset World, told OBG. “Despite the perceived saturation of the market in Thailand, ample opportunities remain given the growth of tourism to Bangkok and other upcoming destinations in Thailand.”

Sector Development

The Thai property sector is transitioning from being one managed relatively traditionally, with developers handling everything from acquiring land to collecting rents, into one that operates more in line with international norms. Companies are starting to include professional managers in the process, having found that the division of labour assigns work to those best able to do it, and also helps guarantee that their properties remain competitive and generate the maximum profits.

International property services firm Jones Lang LaSalle believes that the percentage of office buildings managed professionally in Thailand has doubled since 2010, from 30% to 60%. Almost all condominium blocks are now professionally managed.


Some concern has been raised about whether Bangkok is facing bubble conditions, especially in the residential market. Prices are moving out of the range of local buyers, forcing developers to depend on a higher level of sales to international clients. Concerns have also been raised about the source of the cash used for some purchases and the fact that property markets in South-east Asia are heavily dependent on the inflow of Chinese money. Any economic weakness in China could have an impact on real estate in ASEAN.

However, while prices are indeed rising and the lower end is being squeezed, the market is not yet in bubble territory. The climb in condominium prices is primarily the result of the increase in land prices downtown because of the scarcity of available assets. Speculation is not considered a major driver, industry media notes. In 2016 the land price index remained at approximately 170, and buildings that are being developed have to reflect the underlying costs in their market prices.