Buyers from mainland China are slowing their condo purchases in Bangkok because of the strong baht, overpriced units and a supply glut.
Simon Lee, co-founder and president of property brokerage Angel Real Estate Consultancy Co, said overall sales volume of Bangkok condos bought by Chinese buyers will shrink by half this year.
"Chinese purchases have been sluggish since late last year after the baht appreciated and US-China trade tensions have escalated," he said.
The baht has gained 20% against the Chinese yuan to 4.40 baht at present, compared with 5.80 baht five years ago, when the first wave of Chinese purchases of Thai property began.
With the stronger baht, most Chinese buyers have shifted to condos listed at 2-6 million baht per unit, down from 5-10 million baht earlier, as they seek to control risk.
"The secondary market in Thailand is not active, unlike in Singapore, Hong Kong or China, as Thais prefer new condos rather than second-hand ones," Mr Lee said. "Lacking liquidity, Bangkok condos are less attractive among Chinese buyers."
Overpriced units and overstock are other reasons for Chinese buyers shifting elsewhere to invest, such as Japan, where yields are 8-14% per year.
"Japan is one of the most popular tourist destinations, allowing short-stay rentals," Mr Lee said. "Near popular stations like Namba or Umeda, the number of daily rooms is never sufficient for the large number of travellers."
In Bangkok, on the contrary, condo yields have fallen from 6-7% five years ago to 5-6% two years ago to 3-4% at present. In some locations they're only 2%.
The key factor in the declining yields is the rise in condo prices, driven by soaring land costs. But the rental rate did not rise, as there were many units offered for rent in the market.
"Worst of all is that these buyers cannot rent out units in short-term leases, as the laws do not allow it," Mr Lee said. "The Chinese do not want to break the rules. They want to follow the rules, but the rules should be clear."
He said the number of Chinese buyers refusing to get unit transfers rose from 2% five years ago to 8% this year.
"Chinese buyers were unhappy when they found that developers sold units to later customers with lower prices than the presale prices they paid a few years ago, as developers wanted to clear their stock," he said.
Me Lee suggested developers separate towers for rent and towers for owners' use within projects if there is more than one tower in a project. For projects with only one tower, developers should separate the segments by floor.
To avoid problems with unit owners, there should also be a hospitality company at the project to control and manage short-stay guests so they do not disturb unit owners.
Founded in Chiang Mai and registered in the Cayman Islands in 2014, Angel Real Estate sold 500 condo units worth about 2 billion baht from two condo projects in Chiang Mai to Chinese buyers that year.
Angel entered Bangkok in 2015 and was a sales agent for four condo projects introduced only to Chinese buyers.
The company's customers included Siamese Asset, V Property, Woraluk Property, Sansiri, Pruksa Real Estate, Land and Houses, LPN Development, Narai Property, Property Perfect, Major Development and Supalai.
According to Angel, the first five months of this year saw Bangkok condo sales of 500 units to Chinese buyers, down from 900 in the same period last year.
The company expects to have 1,200 Bangkok condo units sold to Chinese buyers by the end of 2019, down from 1,800 last year.