The world of property investing is filled with stock-standard advice on ways to make tidy profits in returns on investments. These nuggets of information are passed along through the ages with proponents claiming that they are the gold standard in terms of what to follow if one wants to earn from properties over the long run. Investors should note, however, that many of these supposed tried and tested techniques have been debunked over the years for several reasons.
One such theory is that rising property prices are a red flag for a particular market becoming saturated. We explain how the truth couldn’t be further. Thailand’s property sector, for example, has experienced phenomenal growth over the last several years, with key indicators pointing to its upward trajectory showing no signs of slowing down. There are many factors that lead towards property value appreciation:
Economic indicators
The strength of an overall economy is a good indicator of how the property market is fairing. Thailand has been going from strength-to-strength in this regard, gross domestic product (GDP) rising an impressive 4.8% (as of first quarter 2018) since last year - at the highest pace recorded since 2013. The government’s commitment towards foreign direct investment for industrial modernisation and the boosting of infrastructure are two main driving points for this growth.
Aside from the fact that the country’s exports are at a seven-year high, another catalyst for Thailand’s economic growth is its tourism numbers. Projections for the year are for growth in this area to climb by 6%, after last year saw an increase of 9%. With the government spending considerable amounts on infrastructure, more and more tourists will flock to Southeast Asia’s second largest economy. The government is already in the process of reviewing tenders by foreign bidders to build on the nation’s infrastructure in the form of an inter-city rail net development plan as well as air transport and maritime development.
Bangkok also has the honour of being the world’s most visited city according to Mastercard’s Global Destination Cities Index. Many of these visitors are regulars, with some of them beginning to see the value in owning a holiday home that earns passive income for them when overseas. All this points towards a market that will continue to rise over the next many year.
Rise in overall affordability
Property markets become saturated when demand drops, often due to potential buyers getting priced out of the particular market. With wages projected to increase by 5.5% in the country over the course of 2018, many locals will look to park their money in various investment vehicles, property being one of them. Even after factoring in inflation hovering around the 1% mark, the working public will be in a better financial position moving forward. This will ensure that the property market stays buoyant, with affordability for investments staying strong.
Foreign talent to pave the way for demand
Another growing group of property investors that are bolstering the scene in Thailand are expatriates, many of whom are attracted to the country for employment opportunities. With Thailand’s future (4.0) plans to transform the country from past economic development models and its Smart Visa programme that promises to help the country along in terms of ease of doing business, the number of foreigners calling Thailand home will only rise over the course of the next decade or so, with demand for property also staying strong.
It would be extremely simplistic to assume that rising property prices in Thailand are an indicator of the market reaching saturation. Couple all the reasons above with the country maintaining its status as an extremely conducive place to stay, the low cost of living, access to advanced medical care as well as an overall move towards the digitalisation of the country’s economy and what one is left with is an enticing destination to buy property in. The industry should see the upward trend continue over the next several years, fuelled by governmental as well as private enterprise participation in the form of infrastructural developments and strengthening of the overall business environment. With average ROIs in terms of rental yields sitting at 5 to 8 percent and property prices still considerably low on a global scale, Thailand offers investors a stable environment for purchasing real estate.