No Significant Drop in Prices Expected
The Thai market has historically shown it can weather crises without damage to investors.
The ‘Red Shirt Protests’ that turned parts of Bangkok’s shopping and financial district into a barricaded fortress for more than 2 months is unlikely to lead to dramatic drops in property values, although some people have deferred buying decisions for the time being, reveals a study by a company well known for its research.
The reason is because the property market has been dampened by political uncertainty for the last five years.
Those who have followed the pattern of property values during periods of political uncertainty in Thailand will have noticed that prices rise in good times but hold and do not drop in bad times, with steady growth again after the situation improves.
One exception was real estate prices did drop dramatically during the 1997-98 Asian economic crisis, when real estate prices did drop dramatically. But it has to be explained that these plunges took place among secondary grade properties and not prime ones, whose values held up.
The impact of the recent protests, in the opinion of most people living in Thailand, both Thai and foreigners, will be short-lived
So all in all we are still seeing substantial confidence in the Thai property market.
Turning to the resort markets, the study shows that there was no evidence of a drop in value in Phuket and Koh Samui as existing foreign owners of property on the two islands are choosing to hold on to their assets.
The fundamentals of the resort markets are that they are predominantly foreign markets with purchases made with surplus funds. Since there is no financing available to foreigners to buy property, almost all purchases are 100% cash.
Looking at Phuket, most of the buyers are sitting on positive financial gains on their investment and there is no direct pressure to sell. So generally speaking, people only sell when they have made substantial profit. This means there is generally little stock on the market at any one time.
In fact, it has been the global financial crisis that has had the prime influence on the resort markets and this has led to the cancellation of many developments. While big Thai companies have launched major projects in Phuket in recent years, quite a lot of the developments have been foreign-led, although some of these projects have been quite small.
From our experience we have seen a reduced volume of sales but prices are still recording substantial gains for those few sellers in the market.
Despite the recent problems, Thailand is still a top resort destination. And although good prospects in emerging markets such as Cambodia have been reported over the past couple of years, there is no stock of quality resort properties there today.
To see the full report, click here.
