In chic central Bangkok, a foreign buying binge is fuelling a red-hot market for ultra-luxury real estate.
At 98 Wireless, a luxury condo opened last March in the capital, one buyer from Hong Kong snapped up a $2.2 million apartment without more than a moment’s thought. “It was an impulse purchase for him,” says Uthai Uthaisangsuk, an executive at the project’s developer, Sansiri. For the price of a cramped studio back home, the investor had bought an opulent two-bedroom spread with Ralph Lauren furniture, three bathrooms outfitted with Carrera marble, butler service and a chauffeured Bentley limousine.
Scenes like this have become more common in the Thai capital, where foreign money is pushing up prices at the top of the real estate market, even as developers struggle to sell more pedestrian properties. With the economy still recovering from a 2014 slowdown, household debt makes it tough for the average Thai to qualify for a home loan, so companies like Sansiri and Country Group Development are selling luxury to foreigners.
“Developers are having problems selling to locals,” says Ratchaphum Jongpakdee, general manager for Thailand at real estate firm Colliers International Group. “But they have no problem selling to foreigners.”
Buyers definitely get more bang for their buck in Bangkok than in Hong Kong (comparing things like square-footage and bathroom fixtures). But what’s surprising is that, even though condominium prices in the centre of the Thai capital have doubled in the last five years, they’re still cheaper than in less-travelled cities like Jakarta, Kuala Lumpur, or Vietnam’s Ho Chi Minh City, according to real estate advisers.
The price-gap could be set to close, though. Once a niche tourism destination for backpackers, Bangkok in 2016 surpassed London to become the world’s most visited city, hosting 19 million overnight travellers, about two for every resident. The boom has put the city on the map for investors, especially mainland Chinese who are coming in droves.
Last year, land prices in the city centre jumped a record 30 per cent, with foreign investors making up almost a quarter of the capital’s high-end property sales, according to commercial real estate firm CBRE. In the last quarter of 2017, the price of luxury condos rose more than 10 per cent, outpacing every other market segment, data from Bangkok’s Real Estate Information Centre shows.
Fuel for the fire has come, ironically, because of China’s attempts to stop the outflow of money from its borders. Caps imposed last year on how much capital people can take out of the country have had the unintended effect of funnelling cash into property markets like Thailand’s, where prices are relatively cheap.
A scarcity of buildable land in the city centre is a limitation on developers. For investors, though, it’s a big reason high-end apartments should continue to appreciate, according to Patti Tomaitrichitr, an analyst at Macquarie Securities Thailand in Bangkok.
“It’s not easy to find a good plot in a good location right now, so prices will keep going up,” she says.
Sansiri, the developer behind 98 Wireless, the 25-storey apartment tower named for its coveted address, began advertising luxury condos to foreign buyers in 2014, when the local economy was in the doldrums. The company now holds marketing events in Hong Kong almost every month and last year opened three more offices in mainland China, in addition to the one it had in Beijing.
Chinese buyers helped Sansiri sell half of the 77 apartments at Wireless before construction was finished, according to Uthai, the developer’s chief operating officer.
At another luxury condo nearby, the Magnolias Ratchadamri Boulevard, some 80 per cent of the units have already sold, with investors from Hong Kong, Singapore and Taiwan accounting for more than half, according to the developer, Magnolia Quality Development. The 60-storey spire features a five-star Waldorf Astoria hotel on the lower floors.
The numbers are similar at the Four Seasons Private Residences, which is currently under construction on the edge of the Chao Phraya River. Some 70 per cent of the 355 units have already been purchased, with half of the buyers coming from outside Thailand, according to Ben Taechaubol, chief executive at the developer, Country Group.
Thailand has fewer limits on foreign condo ownership than some places in South East Asia. Even though non-citizens are allowed to own no more than 49 percent of the units in any single project, they can buy condos built on freehold land, where ownership doesn’t have a time limit tied to a lease on the underlying dirt. That’s not allowed in neighbouring Vietnam or Laos.
Another benefit: foreign buyers aren’t hit with special taxes, as they are in Singapore and Hong Kong.
The January sale of Britain’s Bangkok embassy, on a coveted freehold land downtown, was Thailand’s most expensive real estate deal ever. The buyers, a partnership between local and Hong Kong developers, paid the equivalent of about $600 million for a parcel the size of six football fields. The plan is to knock down the existing colonial-era buildings and put up an office tower with luxury condos or a hotel on top, according to Central Group, one of the new owners.
“Every day, developers are literally knocking on the doors of embassies, businesses and homeowners, anyone with land in the central downtown,” says Mr Ratchaphum.
“It’s almost impossible to find freehold land in these areas.”