The Singapore investor in the Land of Smiles

To most Singaporeans, Thailand is synonymous with the idea of a fantastic tropical holiday. Travellers from all over the world visit to enjoy a lazy vacation on a sunny beach in Phuket, explore the tropical islands close to Krabi, or hunt for bargains in one of Bangkok’s vibrant malls.

With the strong draw of tourism and a generally positive economy, Singaporean investors are heading to Thailand for a piece of the property market, despite the political unrest that made international headlines in 2013 and 2014.

According to a Signature Residences Worldwide report, foreign home buyers in Thailand mostly hail from the UK, the United States, and Singapore, while buyers from the Middle East, India, and China are increasing in numbers.

The Global Property Guide ranked Thailand fifth among 11 countries for the most affordable apartments, in terms of square metre prices, ranking higher than China and India.

Apartments in Bangkok’s upscale residential areas, such as Silom and Central Lumpini, boast rental yields of between 5 percent and 6.8 percent, with yields on larger apartments rising.

This compares to average Singapore rental yields of between 2.2 percent and 4.6 percent.

A knock-on effect of the tourism industry is that more foreigners are investing in holiday homes. Phuket is most popular, with its tropical beach setting. Phuket-based brokerage Siam Real Estate noted that many foreign buyers look for villas with two or three bedrooms and a pool, often priced affordably, from US$217,000 to US$496,000.

Foreign buyers usually prefer houses in Bangkok, Pattaya, Hua Hin, Koh Samui, and Chiang Mai.

According to the Department of Land, the value of land and building transactions rose by 16.5 percent in 2013 to US$30.6 billion, and condominium registrations increased by 25.1 percent.

Condominiums match middle-class investors’ budgets and small units are welcomed by a younger generation of Thais who value style and convenience over the size of their homes.

Many foreign investors will be seduced by Thailand’s favourable cost of living. From groceries to transportation, prices in Thailand are considerably lower than many other Asian countries.

International Living estimated that a couple may live on a modest budget of around US$1,500 a month in Chiang Mai. The average monthly rent of a furnished two-bedroom house in an affluent area in Bangkok will set you back 40,120 THB (US$1238) a month.

In comparison, an average of S$7,000 to S$15,000 (US$5,167 to US$11,072) is needed to rent a property in a prime zone in Singapore.

Dining is also economical in Thailand. For only US$1, you can enjoy a chicken Pad Thai dish from a Bangkok street vendor, or even a home-delivered cooked to order vegetarian lunch.

Coupled with the strength of the Singaporean dollar, this is ideal for retirees living on a budget.

Thailand is constantly improving its public transportation in major centres. Bangkok currently has five train lines, with five more under construction. The improvements create more accessible areas and increase nearby property values.

According to Global Construction Review, the Bang Sue area of northern Bangkok saw an increase in construction of residential developments after the publication of the State Railway of Thailand’s (SRT) plans to turn the area into a transport hub.

While property may be more affordable, there are laws that restrict foreign nationals from owning property. Chiang Rai Times noted that foreigners are not allowed to own property or land, although they are allowed to lease a property for a maximum of 30 years and a foreigner can purchase a condominium only when a minimum of 51 percent of the building is owned by Thai nationals.

Despite relative optimism about the Thai economy, there is uncertainty regarding its political situation. The country is currently governed by the military junta government led by Prime Minister Prayut Chan-o-cha, established last year.

While protests have stopped, the long-term outcome of the power struggle between the Democrat Party and Pheu Thai party is still uncertain; nevertheless, Bloomberg estimated that tourist numbers increased by almost 30% between February 2014 and 2015.

Thailand remains a favourable market filled with fantastic property potential for the Singapore investor and those attracted to a Thai way of life.

The combination of an appealing Thai baht exchange rate, low cost of living, positive tourism figures, and growing market potential ensures that Thailand will remain an attractive country for investment opportunities, as well as remaining the land of smiles.