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Bangkok is experiencing an incredible real estate boom

Bangkok real estate market
Represents the rise of the Bangkok real estate market: Iconsiam Mall

The real estate market in Thailand has faced constraints in 2019 and may continue to do so in 2020, but there is plenty of optimism for Bangkok as many drivers for growth persist.

Much of the growth across the Bangkok real estate market is driven by Chinese nationals investing in order to store their wealth abroad. The construction boom in Bangkok in recent years has also been galvanised by city workers looking to purchase homes near to their places of work. This, according to The Nation Thailand, has encouraged developers to pursue mixed-use projects. Market growth has been fuelled too by numerous government infrastructure and mass transit projects and low interest rates in Thailand.

Real estate megaprojects in Bangkok

The Iconsiam mall opened in November 2018, pitched as a bellweather for the future of Thai retail. It has 525,000 square meters of retail space and two residential towers, 70 and 52 stories tall.

Some were concerned about transport links to the destination and its 40-45% reliance on tourism at times. However a year later, as per the Bangkok Post, the Iconsiam is acclaimed as a national landmark recently celebrating a successful first year by holding “The Celebrations of Glory ICONSIAM” mega event.

The megamall’s director Chadatip Chutrakul says Iconsiam Co is “very proud to have fulfilled our important mission announced seven years ago.” She adds, “we have proven that ICONSIAM is a game-changing destination which has successfully turned the Chao Phraya River and the Thonburi side of the city into one of Bangkok’s business and tourism hubs.” The mall has been recognised for its contribution to tourism and is held up as a model of retail development.

Further megaprojects in Bangkong planned

SF Development built the retail complex Mega Bangna which opened in 2012. It’s now planning to nearly double to the size of the development with its Mega City project adding condominiums, hotels, and office buildings, that will launch in 2020. The area has transformed from a residential area to a new business centre and a “hub” attracting further investment, according again to The Nation Thailand. Visitors to the Mega Bangna mall are up from 3.8 million in 2018, to an expected 4.5 million in 2019.

Real estate and investment management services company JLL puts property investment across Thailand at over $633 million for the first half of 2019. With over half of that figure originating from two deals in the Bangkok real estate market, the sale of Sun Towers office complex and a development site next to BTS Mo Chit station.

JLL’s managing director Suphin Mechuchep says high land prices and new land and property tax regulations expected in 2020 are motivating owners of underutilised or underperforming land to sell. She says, “this will mean more opportunities for well-capitalised investors to acquire prime sites for their new development projects.” And, that “visionary investors” will capitalize on development projects “despite rising land costs.” JLL expects much of the latter part of 2019’s property investment to occur in Bangkok.

Drivers of growth in real estate market and potential constraints

Chinese nationals spent a record $1.3 billion on properties in Thailand in 2018 as per the New York Times and figures from the Bank of Thailand though there are some concerns this figure could drop as the Chinese economy contracts. Kasikorn Research Centre recently revised Thailand’s GDP forecast, however importantly to Bangkok it is not expecting Thailand’s tourism industry, at 18% of GDP, to contract.

Work on Thailand’s mass transit network is still creating new opportunities for developers, the Bangkok Post in May cited eight projects under construction, three approved by the Thai government, and a further project out for bidding. The Bangkok Metropolitan Administration (BMA) announced in August 2019 its plans to spend $1.6 million on developing a 400 meter stretch of Khao San Road, popular with tourists.

There are also concerns the residential real estate market in Bangkok could be stalling as the take-up rate for new condominiums falls, however the market may simply need time equalize after a period of massive growth. Residential developers appear to be responding by targeting higher-end buyers.

The market continues to grow, but at a much slower pace

Tris Rating predicts housing demand to fall by 10% in 2019. Other figures put overall real estate demand as continuing to rise in Thailand but at 3.8% in contrast to 7.7% growth in 2018. However, within this figure residential construction activity is also dropping. Bloomberg, in May, pointed at new mortgage rules, some of the reason for a fall in new home purchases, creating a “buyer’s market” in Bangkok.

Thailand’s wider economy is currently impacted by political uncertainty and falling exports, but Knight Frank believes the residential property surplus and falling prices may be short lived due to Bangkok’s resilience and the planned infrastructure developments. CBRE predicted slower growth for Thailand’s real estate market in 2019, but still expected high demand for “prime freehold” sites in Bangkok, especially near to mass transit lines.