The COVID-19 pandemic caused grave harm to Thailand’s economy. The absence of tourists affected the country’s prosperity, particularly in resort regions where tourism is the key source of income for the local population.
Content:
- The situation in the country
- Foreign demand for Thailand’s real estate
- Demand for apartments in resort areas from the local population
- Rent in Bangkok
The situation in the country
Since early 2022, COVID restrictions have been gradually eased. According to the WHO, since the beginning of May, the number of new cases has been dropping by 20% every week. As of June 2022, tourists only need to apply for a Thailand Pass online by uploading their personal data and their vaccination certificate to the website (Thailand recognizes Sputnik V and Sputnik Light vaccines). If you are not vaccinated, you need to upload the results of a PCR test taken no earlier than 72 hours before entering the country. Restrictions have already been lifted in Thailand, so beaches, bars, shops, and restaurants are open and operate as usual.
The negative key factors expected to affect the business and the country’s economy in general in 2022 – 2023 are:
- Household debt (90% of GDP) tends to increase, which directly affects people’s purchasing power.
- Interest rates that will probably grow.
- Potential spread of the Omicron strain.
- Household income recovering slower than expected.
- Increased nonperforming loans (NPLs) of financial institutions.
- Growing construction costs due to higher prices of construction materials.
The flow of tourists has been reviving since the start of the year, which supports the recovery of the country’s economy. The return of foreigners has a direct impact on the real estate market.
Foreign demand for Thailand’s real estate
The demand for condominiums in Chonburi from foreign buyers has been growing slightly, while real estate in Pattaya has become the most attractive asset. From the fourth quarter of 2021 to the first quarter of 2022, the demand for real estate in various price segments from foreigners, in general, grew by almost 11%.
The demand for condominiums in Pattaya under 3 million baht from foreign buyers increased by 16.8% in the first quarter of 2022, while interest in condominiums for 3 – 5 million baht rose by 19.7% over the same period. Real estate with the value of 5 – 10 million baht and 10 – 20 million baht is less sought-after. The demand has dropped in the market segment for opulent condominiums that cost upwards of 20 million baht. However, the demand for two-bedroom condominiums is growing and they accounted for 26.1% of all foreign inquiries from October 2021 to March 2022. Most buyers (68.6%) are still interested in one-bedroom studios and apartments. Generally, foreigners’ interest in Thailand’s real estate remains below the pre-pandemic level.
Curiously, despite the current geopolitical and economic situation, foreigners’ interest in Pattaya condominiums was growing steadily throughout this March and April. Construction materials are becoming more expensive because of the Russian – Ukrainian conflict, which increases the cost of properties.
Tourists and buyers from China and Russia who used to play a significant role in the economy of Thailand’s resort cities have not returned to the market. COVID restrictions are still in effect in China, while Russian tourists are affected by the international sanctions against the country.
Demand for apartments in resort areas from the local population
The COVID-19 pandemic led to a sharp drop in demand for inexpensive apartments in Chonburi among local buyers. The situation became significantly better over the first quarter of 2022 when people grew more interested in properties that cost less than 3 million baht, as well as residences for 3 – 5 million baht. The abovementioned sharp decline of demand from Thai nationals occurred at the peak of the COVID-19 pandemic when the demand for condominiums in the price segment of 3 – 5 million baht dropped by 24.1% and for apartments for 3 million baht and less, dropped by 6.2%. However, the domestic demand for condominiums in the up-market segments in Chonburi (5 – 20 million baht) surged during the COVID-19 pandemic and kept growing throughout the first quarter of 2022, although at lower rates. However, buyers were less enthusiastic about properties that cost upwards of 20 million baht.
The interest in more expensive properties with greater floor area is caused by changes in people’s lifestyles after lengthy quarantines and shifting to remote work and study. Buyers now prefer to live in more spacious homes where they can spend time in comfort. The demand for Chonburi condominiums that cost upwards of 10 million baht exceeds the pre-COVID-19 level. It seems that buyers may be consistently interested in this segment in the long term, and this is not a short-term trend caused by the pandemic. However, studios and one-bedroom apartments still account for the overwhelming share of the domestic demand for apartments in Chonburi, with more than 70% of the total number of inquiries from October 2021 to March 2022. Two-bedroom condominiums accounted for 23% of the demand.
The domestic demand for condominiums in Chonburi, in general, surged by 21.2% in the first quarter of the current year compared to the last quarter of 2021. Affordable condominiums at low prices, with bonuses and discounts from developers, boosted this growth, while government programs that were supposed to encourage people to purchase real estate fell short of expectations. State support measures included reducing down payments on mortgages to zero and canceling the real estate tax.
Rent in Bangkok
The demand for rental condominiums in Bangkok grew in the first quarter of 2022, which shows that domestic migrants from other provinces, as well as foreigners, are coming back to the city. Many companies resumed office work in the second half of 2021, which inevitably caused an inflow of people over the past two quarters.
The demand for rental condominiums in Bangkok grew by 20.9% from the fourth quarter of 2021 to the first quarter of the current year. The interest in them peaked in March when the greatest number of inquiries over the past six months was recorded.
The demand for studios was the highest, they accounted for 53% of the rental demand in Bangkok from October 2021 to March 2022. Two-bedroom apartments were sought by 34.5% of tenants over the same period. More than 70% of all inquiries in October 2021 and March 2022 were made for condominiums in downtown Bangkok. At the moment, the city center has the best-developed transport network, although this is supposed to change in the nearest future. Several new lines of electric trains have been put into operation. This may create the potential for new rental spaces in Bangkok condominiums.
In the first quarter of 2022, 16 new condominium projects with a total of 14,088 apartments were launched in Bangkok. This is the highest since the fourth quarter of 2019. The sales of new condominium projects in Bangkok grew by 62% over the same period, which shows great promise, as it’s the best performance since 2018.
The current situation in the world is extremely uncertain, so real estate in Thailand may become a good investment option for foreigners. The national currency of Thailand is still one of the most stable in the world. For instance, 1 dollar equaled 33.37 Thai baht in 2010, while at the end of 2019, the dollar to baht rate was 30.15. As of June 2022, the exchange rate is 35 baht for 1 US Dollar. Thailand’s economy is growing consistently, its tourism sector is developing, and real estate prices are rising.