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Economy


THAILAND'S CONDO MARKET SINKS AS CHINESE INVESTMENT EBBS

Coronavirus travel bans speed drop sparked by stronger baht and trade war


Thailand's coronavirus lockdown left central Bangkok deserted. The pandemic has
rubbed salt in the wound left by falling Chinese real estate investment. (Photo
by Akira Kodaka)
JASON TAN, Contributing writerJune 10, 2020 13:00 JST | Thailand
CopyCopied

BANGKOK -- Beijing native Bobby He has a dozen Chinese friends who own
condominium units across Thai hot spots such as Bangkok, Phuket and Pattaya.

"Some even bought three units at the same project," he said. "They plan to
retire in Thailand, so one unit is for self-stay while the other two are to rent
out to support retirement life."

Though property in Thailand seemingly offers an attractive bargain for Chinese
buyers compared with their home market, these Thai investments are plunging in
value as the coronavirus pandemic hammers the global economy.



The Beijing native said he even heard of a Chinese investor who spent 3.8
million baht ($121,000) on a condo unit in the outskirts of Bangkok, only to
learn that the developer recently slashed prices to below 3 million baht.

It is no secret that Thailand's residential market depends heavily on Chinese
investors, who became the biggest source of tourism income in recent years
thanks to the kingdom's proximity to China, its cheaper cost of living and
pleasant weather.

Mainland China and Hong Kong accounted for 43% of the 92.16 billion baht
transferred from abroad by all foreigners to buy condo units in Thailand in
2018, according to the Bank of Thailand, the country's central bank. The U.S.,
Singapore, Taiwan, the U.K. and Japan were also among the biggest spenders.
Foreigners are allowed to own 49% of a condo project in Thailand, and they are
barred from owning landed property.

But Chinese money has ebbed from Southeast Asia's second-largest economy since
last year due to a stronger Thai baht and a simmering U.S.-China trade war. The
pandemic has rubbed salt in the wound.



Huang Cheng, a native of the southwestern Chinese city of Chengdu, owns several
condo units in Bangkok's Wong Wian Yai and On Nut -- two popular rental
locations for Chinese Airbnb travelers. Though Huang easily rented out units for
at least 1,000 baht before the pandemic, most of his condos now are idle.

Thailand has barred international commercial flights into the country until the
end of June. Despite talk of allowing travelers, especially Chinese, into the
tourism-reliant country, market observers said tourism activity will not resume
until the October-December quarter.

The Tourism Authority of Thailand projected in May that foreign travelers will
decline this year by almost two-thirds to 14 million, the lowest number in 14
years. The country hosted a record 39.8 million foreign arrivals in 2019.

Thailand reported slightly over 3,100 confirmed coronavirus cases as of Tuesday,
largely bringing the pandemic under control in comparison to neighboring
countries such as Singapore, which logged over 38,500 in the same period.

Thailand's property market was depressed by the 1997 Asian financial crisis,
regaining momentum only in 2010. Record-breaking investments in condo projects
were made in 2012 and 2013, thanks to the government's incentive for first-time
house buyers.

From 2010 to 2018, an average of 105,000 new units debuted in Bangkok yearly,
according to Bank of Ayudhya's research house Krungsri Research. But sales
totaled only about 96,000 units per year, which lifted housing inventory.

As the pandemic hurts the country's economy, Thai developers are adopting
various tactics including 50% discounts to entice buyers.

The condo trend "is likely to slow both in terms of supply and demand," said
Risinee Sarikaputra, director of research and consultancy at Knight Frank
Thailand. She said it is expected to take "another two years for the condominium
market to improve."

Around 100,000 units remained for sale in Bangkok as of May, she said.

AP (Thailand), which builds the Aspire condo brand, reported a drop of over 40%
in first-quarter net profit from a year ago to 618 million baht. Revenue dipped
31% to 5.4 billion baht.

Rival Sansiri, familiar to overseas buyers for its premium condos, saw a steeper
85% decline in net profit to 62 million baht. The company already felt the pinch
last year, when it logged a mere 3 billion baht in total presales from foreign
buyers, a plunge from 14 billion baht in 2018.

To increase liquidity as most buyers -- local and foreign -- are expected to
tighten their purse strings, Sansiri recently rolled out a "pay early discount
scheme" for its luxurious XT Ekkamai project.

The 38-story high rise developed by Sansiri and Japan's Tokyu is slated for
completion in December. Buyers who opt to deliver as much as 75% of the
outstanding payment can enjoy discounts of up to 12%. That means a 30-sq.-meter
unit at the prime location of Ekkamai is now for sale at 4 million baht.

Vichai Viratkapan, acting director-general of the Real Estate Information
Center, said the government could devise visa-incentive schemes for foreign
buyers if they expedite their transfer of ownership of property. The center is
an industry researcher under the purview of the Thai Ministry of Finance.

Thailand doesn't grant foreign property buyers an automatic resident visa. If
these people wish to stay in the country, they need to apply for work,
investment or retirement visas.

The "Malaysia My Second Home" program in Thailand's Southeast Asian neighbor
allows foreigners a 10-year renewable residence visa, provided that they put in
a minimum fixed deposit of 150,000 ringgit ($35,170) with a local bank. In
October, Malaysia reduced the threshold for foreigners to buy property to
600,000 ringgit, from 1 million ringgit, hoping to ease a supply glut.

Bobby He, who resides in Bangkok, is taking a more cautious approach. He
currently invests in only one property, where he plans to stay with his partner
upon completion over the next two years.

"It's better to be safe than sorry," he said. "Doing homework is critical."









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