Neil McDonough

An unbeatable investment

Ten reasons to invest in Bangkok real estate


Many people emigrate to other countries looking for opportunity in their lives. They see it as a chance to have a better life than back home. Of course it is an adventure as well and perhaps there is a romantic element linked to their decision, but most expats who become 'permanent' residents of Thailand or Bangkok only do it if their lives are improved in the process.

Of course Thailand is dubbed a 'Developing Country' therefore the moniker of a 'land of opportunity' comes with such a term. With alleged fortunes to be made. Well no one can promise fortunes, but here are a few reasons why investing in real estate in Bangkok may be a shrewd move you could take.

1. Thailand is a Developing Nation

Unlike the home countries of most Ajarn.com readers, such as the USA, UK, and European nations, Thailand's GDP increase year on year is significant. In Europe, UK and USA we are lucky to get growth rates of 2% or at the very most 3%, whereas Thailand looks for regular growth rates of between 5-7%. Look at the graph below from the world bank that illustrates how this has affected the individual wealth of Thais in the lat 50 years.

Some foreigners I speak to believe the growth has happened and it's over. But the graph above suggests quite the opposite. In fact apart from 1997 and 2008, the graph looks to be getting steeper, i.e. Thais and Thailand are getting richer, faster!

2. Real Estate in Bangkok is going up

Again for years now I have been told by well-educated, successful and informed foreigners that Bangkok's property bubble is going to burst. There are too many condos, hotels, apartments etc being built, and it will only be a matter of time before it all comes crashing down.

Well I have been told that consistently for 8 years when we started our business and in that time property prices in Bangkok's city center have more than doubled. From 50 000 Baht/sqm back in 2005 to approximately 110-120 000/sqm for a good quality condo in central Sukhumvit between Asoke-Thonglor.

Yes of course there may be a future correction (all markets experience one once in a while), but the chances of a 50-60% drop in prices to get back to 2005 levels is almost impossible. In fact even a 20% drop would be huge and unlikely.

3. The AEC is coming in 2015

Yes I know there are some disputes to rectify and it is not a foregone conclusion, but even the thick-headed politicians with their own personal agendas realize that a bigger market with more freedom to move capital, labour and goods and services will in the long-run be of huge benefit to Thailand and the biggest individual benefactor will be Bangkok.

However poor you think Laos, Cambodia and Burma (Myanmar) are, you can be sure there are some massively wealthy individuals who have vast sums of money just waiting for investment. Countries such as those named and indeed Vietnam and Philippines don't have the range of real estate Bangkok possesses. Therefore for a quick way to invest their money safely these individuals will be looking at cities like Bangkok and investing heavily. Just like rich Arabs invest in London and other European cities as their own countries do not have the range of investment opportunities available.

The bottom line is a huge influx of foreign capital from the region and beyond into Bangkok will boost property prices. So now is the time to buy.

4. Infrastructure

Yes I know as a foreigner we despair at how inadequate the Bangkok infrastructure is. Compared to cities like New York, Tokyo, Sydney or London it is poor. With a population of 12-15million (depending which figures you read). Yes it's true the approximately 50 stations that make up the BTS and MRT system at present are hardly adequate. But then that is a lot more than most cities in SE Asia have.

Look at Jakarta, an even bigger city - 17 million - and an even richer country - part of the G20 - and yet not a single BTS or MRT equivalent. Ho Chi Minh, Hanoi, Phnom Penh, Yangoon, the list goes on. Even Kuala Lumpar's system is tiny! Only really Singapore in SE Asia makes Bangkok look inadequate on metro systems.

And it's improving fast. Just travel to Bang Son, Talingchan or Kae Rai and you will see huge infrastructure projects nearing completion. With miles and miles of track both raised and underground.

Again going back to point (3) if you were a rich non-Thai which city would you buy real estate in? One with no metro system or one with an existing and rapidly expanding one?

5. The sheer size of Bangkok

Yes it's true Singapore is better organized, yes it's true they have a better metro system, road system and things run much smoother. But they have huge advantages in that they only have 6 million people in the whole country. They are a city state so they can block transport into the city easily. And they are relatively tiny.

Bangkok has at least double the population. Bangkok also has 55 million other Thais needing and wanting access to it whenever they want. But this in the long run is to Bangkok's advantage.

Larger populations generally lead to faster growth, more wealth and certainly more demand. As more and more Thai's urbanize themselves, they will need accommodation. Inexpensive at first for most newcomers, but as Thai wealth increases (see the graph in point (1)) so will their demand for mid-high end real estate.

6. The airport and shopping plazas

I'm sure I am not the only foreigner that sniggers every time I see a large space of land in the city center cleared and then 2-3mths later the rumor or the bill-boards come out confirming yet another shopping mall being built - 2 stations down from the last new one.

However this vast shopping infrastructure is rapidly turning Bangkok into the shopping mecca of SE Asia. It used to be that Hong Kong or Singapore were the places to go to shop, but these days nothing in SE Asia compared to Bangkok. And once again the opening up if the AEC will boost this even more.

Already rich Cambodians, Lao, Burmese and not to mention Chinese, Indians and Pakistanis are flying to Bangkok in their millions each year to explore the shops of Bangkok. Their countries either do not possess the luxury of the shops in Bangkok, or do not possess the range.

I know two people very well who have lived extensively in both Hong Kong and Jakarta and tell me that in their respective cities they can only buy very low end goods or very high-end goods. So they have to come to Bangkok to get the mid-ranged items we take for granted here and in the west.

7. The ease in which to live in Bangkok

Without going into discussions or comments on either race or religion it is clear that of many of the SE Asian destinations on offer, Bangkok offers one of the easiest and most relaxed ways of life.

It's relaxed and accepting culture allows foreigners to live here very easily and comfortably, without too many rules and regulations that conflict with our own up-bringing.

Many foreigners come to Bangkok planning to stay a few years at most and never leave, realizing that not only does Bangkok offer a more relaxed environment than most other options, but also more than their hometown perhaps did.

8. Property prices in Bangkok

As mentioned above so far, Bangkok's infrastructure - as inadequate as it is - trumps most of its rivals in the region. In fact only Singapore offers a more comprehensive system and even then dealing with a much smaller city and population.

I of course realize that Hong Kong is not technically part of SE Asia, but it is both a well known and popular expat destination and I have mentioned it above, so I will drag it into this point as well.

Bangkok may be trumped by Singapore and Hong Kong on the infrastructure stakes, but at what cost? Well it may surprise you to know that city center properties in Singapore are on average 6 times more expensive than the Bangkok equivalent and Hong Kong even more expensive at 8 times the price. Therefore showing Bangkok to be pretty good value for money.

Also with that level of differential, it gives plenty of scope for the gap to be narrowed.

9. Surrounding areas

Again where Bangkok trumps the likes of Singapore, Hong Kong and even cities like Jakarta are the surrounding areas. If one lives in Hong Kong or Singapore they almost invariably have to jump on a flight to go somewhere, as it is hard to impossible to 'get-away' for a weekend or a few days inside these cities.

The there can be the hassle of visas and of course the cost of international travel, not to mention the time. Whereas if you're and expat in Bangkok, you can just drive to a beach or a national park within a few hours and be in a totally different environment.

And it's inexpensive too. A train to Hua Hin can be less than 100 Baht and to Ayuthaya less than 50 Baht, and both offer completely contrasting environments to Bangkok and can be a lot fun.

10. The Weather and Food

I'm sorry I'm not even going to present an argument here. There is simply no place in SE Asia where the two combine better.  Yes of course almost all of SE Asia is hot, but can they offer the culinary delights of Bangkok? In my experience the answer is No!.

The only city that comes close on the culinary front in my opinion is Hanoi, with its blend of Vietnamese cuisine and French flair, but even then it gets cold there in the winter and rains at the same time, a grey day there can be like being back in the UK.

 




Comments

The article misses out some very pertinent points.

Firstly, many years of growth do not signal further years of gains to come - quite the reverse, as the Western World has just found out.

Secondly, the Western World is now recovering, or at tleast, things will not get worse. This, as we can already see, has an impact on the exchange rate. Therefore by waiting you might get more baht for your local currency (assuming that you, like many, are bringing money to Thailand to buy a property).

Thirdly, with current political tensions, and an 'inevitable political hand-over' to come, it might be wiser and more cost effective to rent and wait to see how events transpire. You might be getting LOT more baht for your bucks.

Regards all.

By Neil (Not the OP), BKK (10th September 2013)

If there is a bubble you don't care about BKK vs HK, but prices today vs tomorrow. Yeah you can buy a property now for $X but you might be able to buy it for $(60%)X in a couple of years time. And if you are talking of bubbles why not look at standard indicators like:
-house/condo price indexes vs inflation
-lax lending standards
-growth in housing stock vs population growth
-rental yields

In Bangkok the first alarm is on, the second also, third haven't seen good data, fourth rental yields still look ok, so alarm off.

By Kieran, thailand (21st August 2013)

Agree with Phil, the thrust of the article is that whilst Singapore and Hong Kong have a vastly more extensive mass transit system they are both disproportionally more expensive than Bangkok and don't offer the same level of mid range lifestyle choices. So compare Bangkok to any of the other SEAsian nations and Bangkok wins hands down because of it's transit system as well as the other examples. If you lived in the Bearing equivalent of a suburb in Hanoi or Phnom Penh then yes you'd be far from the centre and the superstructure but in Bangkok if you're close to the BTS you're close to both.

By Sam, Bangkok (20th August 2013)

"Bearing is not central Bkk, not even close"

Well, as is pointed out in many a guide book, Bangkok doesn't actually have a centre. You make Bearing sound as if it's in the middle of nowhere. From Bearing BTS you can be at Prompong and Asoke within 20 minutes and Siam Square within half an hour.

By philip, (19th August 2013)

philip,
Bearing is not central Bkk, not even close. You can look in Samut Prakan for a condo, too, and say what a deal it is, but why not buy a house instead of throwing away good investment dollars on a condo?

The author doesn't really discuss anything other than condos in his article, and the friends I have who've invested in condos have a heck of a time unloading them.

By Guy, Bkk (19th August 2013)

I bought a 2 bedroom condo about 5 years ago for just under 3 million. So far, things have gone well. The area is on the up and the BTS will arrive by the end of this year. The 'village' I live in is great - swimming pools, a gym, restaurants etc etc. I am very happy with it.
However I do feel that it would be very hard to sell my place if I did decide to move on. There are simply so many empty condos all around the city and the fact of the matter is that people here don't want to buy old condos, they want sth brand new. So I do think that resale opprtunities are quite limited. On a positive note, if u take care of your place and live in a well maintained development then rental is a real opprtunity.
I agree with most of what the article states, but I am yet to be convinced that resale of property is easy in BKK.

By Paul, BKK (19th August 2013)

Guy, BKK I'm no property expert but I disagree with much of what you have written there.

1) You can pick up a new condo of that size for way less than 5M in the area around Bearing BTS and I know because I've looked at them. My wife is looking at buying one as an investment to offset her tax rates or something.

2) Resale opportunities are none? That's just plain wrong. I know at least half a dozen people from different walks of life who have sold condos in the last 12 months and walked away with far more profit than I have made in that time from investments. I'm not saying all condo sellers will profit from a sale but to say no one will is unfair and incorrect.

3) Are you an investor? I am. I've got at least a dozen different investments in a portfolio. Some do well. Others are a complete waste of time. Ultimately you are looking at getting back 6-8% a year and that's optimistic simply because the whole financial world has never been in such a mess. A lot of the investors on a busy money forum I frequent (many of them very experienced investors) have lost a lot of money on even 'low-risk' stuff.

By philip, (19th August 2013)

Condos are always the last to appreciate in an improving market and the first to depreciate in a market 'correction.' Currently, most new condos in Bkk are listing at more than 5M baht for a 35 square meter room, and that's just the starting price. The writer does not discuss monthly condo fees, resale opportunities (none) or what other types of properties might make good investments in Bkk. Anyone who has 5-10M baht to buy a condo would do better to rent in Bkk and investment the money elsewhere.

By Guy, Bkk (19th August 2013)

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