A leading property developer says many expatriates in Thailand feel that bureaucrats have mounted a new anti-foreigner campaign
The Thai property market will likely fluctuate until 2013, and the current oversupply will not be absorbed even then because new project launches will keep pace with fresh demand. So today's overbuilt stock will not be completely reduced, says Jens Brochner Nielsen, CEO of D2 Real Estate Company.
He also said that as the outlook of the Thai market differs from foreign markets, now is a good time for Thais to buy condominiums at realistic prices, helped by the prevailing low interest rates.
This is doubly important because inflation has a tendency to eventually creep up when salaries rise, which will also drive up construction costs.
However, Mr Nielsen said the situation is quite different for foreigners in Thailand, with many of them perceiving that bureaucrats have mounted a new anti-foreigner campaign.
"We can read it in the newspapers every day, everywhere, amid all this talk about purchasing through a [Thai nominee] company or whatever. 'Foreigners want to control the land', " he said.
He added that some people here are not looking deeply into this issue and don't see that the purchase of a single house has absolutely no influence on Thailand as a whole. Such a purchase could be through a nominee or a company.
But in any case it is likely to be part of a bigger land plot, which at the end of the day is controlled by a Thai.
"The big problem here is some people feel that foreigners can do something that Thais can't and are turning it into a scary campaign against foreigners."
Mr Nielsen said this would deter foreigners not only from buying land and houses, but also condominiums. Although 30-year leaseholds are permitted under Thai law, some foreigners even question whether this is a sound step to take.
He expects the inflow of foreign money to purchase small properties in Thailand to dwindle next year and not pick up for another three to four years.
"I think we will see an outflow of foreign currency. Foreigners who have bought a single house through a company or whatever are now trying to sell it and take the money out of the country. At the end of the day this will influence the Thai real estate market."
Some foreigners considering investments or property purchases are also wary of corruption in Thailand. Transparency International recently reported that the country's ranking had fallen to 84th in the world from 80th place - the higher the number the worse the problem - a year earlier. Mr Nielsen observed, however, that there may be some misunderstanding. Foreigners might think that corruption means paying others to do something illegal. While this may be true elsewhere, his experience here shows that bureaucrats do not break the rules and regulations, but only speed up the flow of work when payment is made.
"Maybe this is a way to pay for flexibility and services to let things move faster, but not to get permission for something that goes against the rules."
On the positive side Mr Nielsen said Thailand is in a special position because it has not been as affected by the global economic crisis to the extent that some other countries have, with unemployment modest and expected to get better.
Even so, Mr Nielsen said he did observe during his participation in property exhibitions in Singapore, the Middle East and London earlier this year that people who have no knowledge at all about Thailand have a negative attitude toward the country.
However, those who have travelled here or have had dealings here are relaxed about the current problems within the country. He observed that in London those people who know Thailand are interested in investing in Thai property because they are confident of getting a reasonable return on investment as property prices have remained more stable than in some other countries, thus reducing the risk of negative price fluctuations.
Despite strong undercurrents within the property market, D2 Real Estate Company, which is developing Tropicana Villa and Tropical Beach Senior Resort in Rayong, has received good a response from Australians, mainly in the 35 to 55 age group, with Americans also slowly returning after two years of almost total absence. The Swedish market has begun to revive and there is good interest in the UK, mainly from retirees.
"Thai prices are attractive and Thai properties are very attractive. In my opinion the quality of construction here is still fair to good and we are not seeing the trend prevalent in many other countries to save as much as possible on everything."
Mr Nielsen added that property developments in Rayong were starting to attract the interest of Thai investors keen on obtaining fair returns from renting them out to foreigners. Those buying D2 condominiums in Rayong are guaranteed a 6% annual return over five years, with an additional guarantee of reselling the unit within three months of the property being put on the market.
Of all Thai resort property markets, Jomtien-Pattaya concerns Mr Nielsen as it could see a slight drop in prices. The resort city has been overbuilt over the past few years but also some hard-pressed foreigners are dumping property at low prices to get some ready cash.
The reason they could sell at steeply lower prices is because foreigners mostly buy Thai properties in cash because they have difficulty getting mortgages.
He also does not expect the high-end Phuket market to revive for the next three to four years, as foreign investors who have bought pricey real estate on the island now face difficulty reselling their units. "This could lead to the high-end market prices dropping over the next two years."
Mr Nielsen noted that Singaporean investors are now overcoming the shock of the global downturn, but said these same investors also know that Phuket's high-end market will not be as good as it was before for another three to four years.
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