By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
Despite its current political and economic troubles, Thailand remains an attractive location for property investors, new data compiled by Global Property Guide, a popular web portal focusing on residential property buyers, shows.
According to the data, Thailand continues to boast some of the highest rental yields within prominent real estate destinations in Asia while still having some of the lowest property prices per square metre for premium developments in the region at an average of $3,952.
Compared to top property hotspots in Southeast and East Asia, Thailand’s premium property prices are less than a third of both Hong Kong ($22,814 per square metre, rental yield 2.82%) and Singapore ($15,251 per square metre, rental yield 2.83%), but Thai rental yields are nearly double. In terms of low average sales prices, Thailand is just topped by Malaysia, where, however, yields are also lower.
Much of the current demand for premium Thai property comes from buyers from other East Asian countries, as well as from Middle East and Europe.
Many real estate investors realise that the main regional property markets of Hong Kong and Singapore are cooling off and the investment environment has become more prohibitive there, and thus are looking for alternatives with comparable infrastructure such as good air connectivity, top healthcare facilities, international schools and the like, which Thailand indeed provides.
Buyers are apparently not held back by the current military junta ruling Thailand and the legal uncertainties this might entail. The value of land and building transactions surged by 16.5% to $30.6bn in 2013, according to official government figures, the year when violent street protests broke out. In 2014, the market still performed well.
Though all property sectors across the city were hit by the political turmoil and the subsequent military coup in the first half of last year, conditions in most sectors picked up in the second half as the political situation began to stabilise. In 2015, the property market extended its resilience, and developers expect sales on the residential market to grow between 5 and 10%, with prices of homes and land to climb by at least 5%.
However, there are also downsides of investing in residential property in Thailand. The so-called round-trip transaction costs, the total costs of buying and then re-selling a residential property including legal fees, taxes, transfer costs and agent fees, are close to 11% of the property price, more than double than in Malaysia and just a little bit lower than such costs occurring in Singapore.
Furthermore, new destinations are challenging Thailand as emerging property markets in the region, most of all the Philippines, where rental yields in premium developments in Metro Manila have already reached around 7.5%, but square meter prices also have skyrocketed to a current average of $3,156. Another upcoming market seems to be Jakarta, where now yields of about 7% are achievable at average square metre prices of around $2,766 for premium developments. However, round-trip transaction costs in those two countries are at around 15%.
In comparison, the highest rental yields in the world can currently be achieved in the Middle East, namely in Amman, Jordan and in Doha, Qatar, with yields between 10 and 12%. Other hot property markets in the Middle East region are Cairo, Egypt (9.4%) and Marrakesh, Morocco (6%). Dubai follows with 5.82%. The least attractive property markets globally in terms of annual yields are currently Mumbai, India (2.22%), Vienna, Austria (2.18%) and Taipei, Taiwan (1.57%).