Investing in Thai real estate is no white elephant

The Thai real estate sector has undergone intense scrutiny over the last 2 ½ years. The devastating Tsunami in December 2004 and military coup in September 2006 certainly gained the ‘land of smiles’ global attention however the Thai government and its people have worked hard to utilise this interest positively. Far from being a white elephant (which are incidentally sacred and a sign of prosperity in their native SE Asia), there is continued interest in Thailand as an investment opportunity.

Thailand has progressively recovered its former economic vigour, strengthened by increased government spending, moderate export growth, real GDP growth of 4.5% (in 2005) and substantial inflows (US €7.9 billion in 2006) of foreign direct investment. Recent economic growth in Thailand registered a healthy 4.3% increase in the fourth quarter of 2006 with projections of a solid 5% growth in 2007.

A key economic growth sector has been tourism which accounted for an impressive 9% of Thai GDP in 2005 according to the Bank of Thailand. The number of tourists visiting Thailand has almost doubled over the last decade with the Tourism Authority of Thailand (TAT) predicting continued growth of 7% for 2007, to an estimated total of 14.8 million tourists, generating Baht 547 billion in the process.

A solid economy coupled with a renowned reputation as an attractive tourist destination is having a positive affect on the Thai property market, providing some excellent and varied opportunities for the overseas property investor. Resort developments such as those in Pattaya, are proving particularly popular not only with foreign buyers but also Thai residents, the thriving ex-pat community and the emerging Asian middle classes especially the Chinese for whom Thailand is the 4th most popular destination for foreign travel.

As a consequence of shifts in worldwide tourism trends, Thailand’s tourism market is experiencing a dramatic increase in demand for longer-term rentals in villa and condominium accommodation as opposed to traditional hotels.

“This is where the Thai property market is prospering”, comments Kevin Prior, Sales Director of Obelisk International. “Property costs a third of other tourist hot spots and when combined with impressive capital growth shown to have been maintained over several years and a year round rental season with consistently high returns there is significant attraction for investors.”

To fulfil the growing demand from foreign second home owners, retirees and expats, coastal resorts such as Pattaya Heights are being developed. Pattaya is Thailand’s most developed and popular tourist destination dubbed the “Thai Riviera” attracting over 5.8 million visitors annually (2006, TAT). Simply once a small fishing village, Pattaya was discovered as a Bangkok beach resort in the 1960’s and then went on to be a place of R&R (Rest and Recuperation) for the nearby US military. Today tourists from Western Europe, Scandinavia, Russia and the USA to name a few come to enjoy the superb beaches, modern shopping malls, high end leisure activities such as golf or sailing, Thai culture and the renowned nightlife. And being only now 1 ½ hours from the new Suvarnabhumi International Airport in Bangkok (capable of receiving 45 million passengers annually) as well as having its own regional airport means that Pattaya is more accessible than ever before.

The real estate market in Pattaya is booming with Thai nationals buying first ‘western style’ homes here as well as foreign nationals purchasing second or retirement properties. Many experts believe the city to be experiencing a second cycle of growth as increasingly higher end luxury developments such as the 91 floor Ocean 1 Tower and other residential communities spring up in Pattaya.

As an investment, real estate in Pattaya presents an excellent opportunity. The Pattaya Heights project from Obelisk International for example offers 114 superbly appointed studio and 1 bedroom apartments at 24% below average market value. Located in a secure and tranquil area of the city next to the beautiful Royal Park, Pattaya Heights offers spectacular views over the Bay of Pattaya. It is the first condominium development in Pattaya to have two ‘infinity edge’ roof top swimming pools as well as 2 mini golf roof top courses, sun deck, bar, gym, coffee shop, 24 hour security, underground parking, recreational gardens and a Jacuzzi bath as standard in all apartments.

Investment in a 1 bedroom apartment averages at £61,970 and capital growth is expected at 15% per annum for 5 years. Kevin Prior comments, “Pattaya Heights is an attractive investment opportunity for both the short term investor looking to buy off-plan and sell on completion due to the strong resale market as well as the investor looking at generating both capital gain and rental income from a longer term investment.”

The Chornburi province in which Pattaya is located has 7900 registered expats (Labour Ministry, Sept 2006) and this community has been growing by 20% per year since 2004. The majority (60%) of Pattaya Heights’ profiled buyers currently reside in Thailand providing a strong resale market locally. With regards to rental incomes, western style condominium properties are among the most sought after in Thailand. Average rental yields are expected between 6 and 7% per annum with a conservative monthly rental income of £489 for a 1 bedroom apartment. Tourist arrivals to the province have increased at an annual rate of 10% since 2001 so there is no shortage of demand for rental accommodation.

“The Thai property market is very much on the up,” comments Kevin, “investing in real estate in regions such as Pattaya is by no means a liability or white elephant. On the contrary we at Obelisk International believe Thailand has a future of prosperity and success ahead of it. This is just the beginning.”

For more information about investing in Thailand or the Pattaya Heights project, visit obeliskinternational.com.