The property market in the largest northern province has flourished in recent years, spurred by a tourism boom, the entry of giant retailers and the effects of massive flooding elsewhere in 2011.
Floral Parc Residences near the Royal Flora Ratchaphruek was launched last month. It will comprise three seven-storey buildings with 200 units worth a combined 300 million baht. Units will be sized 40-80 square metres and priced between 2.1 million and 6 million baht.
Its prospects remain good alongside an expansion of Chiang Mai airport, upcoming Asean economic integration and planned investment in transport networks.
The property boom began in late 2011 when Thailand suffered heavy flooding, particularly in Bangkok. Residential demand turned to provinces, particularly major ones where facilities are good and developments are planned.
Chiang Mai is an attractive destination because there will be many projects that can spur the province’s economy and growth, according to the Chiang Mai Legal Execution Office.
The Chiang Mai-Chiang Rai motorway will link with the R3A highway, which connects southern China, Laos, Myanmar and Thailand. The province also plans to build a fourth ring road to support its growth and urban expansion.
A high-speed rail route will reduce the land transport time between Bangkok and Chiang Mai from seven hours to 3.5 hours. Despite the project being frozen by the political crisis, it will be in the plans of any new government.
Seri Karunathep, a vice-president at Quality Houses Plc, said infrastructure development plans including a road tunnel, the R3E economic route and the airport expansion are positive factors boosting the property market in Chiang Mai.
Besides Chiang Mai International Convention and Exhibition Center, the tourism industry will be boosted by the airport development.
With an investment of more than 100 million baht, the upgrade will include adding an eighth apron for large aircraft and expanding the international arrival hall and domestic departure hall.
“Chiang Mai still lacks a mass transport system as the existing transport does not contribute to the city’s growth,” Mr Seri said. “Local people also know little about Asean economic integration, which directly benefits tourism, trade and investment.”
Asean integration will develop Chiang Mai as a node for logistics, tourism, investment and border trade, which will boost the local economy and attract immigrants looking for a housing unit.
“Changes in Chiang Mai residential demand have emerged in the past two years since the entrance of big-brand developers from Bangkok. Homebuyers tend to buy for investment or renting out.” said Mr Seri.
In the past, homebuyers in Chiang Mai favoured a single house or townhouse priced 2-3 million baht and most were used for the buyer’s own residence.
Bangkok developers keen
Many Bangkok-based developers are now providing more choices such as condos, commercial buildings and shophouses.
They introduced housing with modern designs and functions, brought public relations and marketing and applied construction innovations such as prefabrication that changed the housing landscape in Chiang Mai.
Local developers needed to improve their products to compete with the big brands, increasing competition in the market.
Seri: Transport work is boosting market
According to the Real Estate Information Center, Chiang Mai had 150 housing projects with sales activity of about 21,400 units as of the third quarter of 2013.
They included 110 of single house and townhouse projects with 15,500 units and 40 condo projects with about 5,900 units.
In the first nine months of 2013, more than 20 low-rise projects were launched with 2,300 units and 14 condo projects with 2,500 units.
Mr Seri said one negative factor facing the property market is the new town plan, which has regulations that do not support the city’s growth direction.
Quality Houses entered Chiang Mai’s property market in late 1996 when it saw the province’s strong potential as the region’s centre of economy, trade and tourism.
The province has a policy to promote itself as a liveable destination where many people are keen to relocate. Its population of about 1.65 million is the fifth highest in the country.
During 18 years in Chiang Mai, Quality Houses has launched six single-house projects worth a combined 5.25 billion baht, two of which were sold out, and a condo project worth 420 million baht that is expected to be sold out in the second quarter.
This year it plans to launch two single-house projects worth a combined 1.02 billion baht with unit prices of 3-8 million baht and two condo projects worth a combined 490 million baht with unit prices of 1.7-2.5 million baht.
Mr Seri said the condo market does not face an oversupply because new supply has slowed down in the last two years.
In 2011, condo units sold totalled 1,240 worth 2.76 billion baht. In 2012, the number rose to 4,049 units worth 9.5 billion baht, a record for the province.
Most buyers were seeking their own residence, while investors were found only in some locations.
The single-house market has continued its expansion but at a steady level of 8-10% a year. Highest growth was in units priced 3-4 million baht — a sector that grew by 17% from 2012-13.
“The political situation has had a negative impact on the housing market. A decrease of 10% in overall market sales in January was mostly in the condo segment,” said Mr Seri.
Despite condo projects mushrooming in Chiang Mai city, demand is strong due to high numbers of foreign tourists who may become property buyers, said Somchao Tanthathoedtham, chief executive of SET-listed developer NC Housing Plc.
He said tourism has been a key driver for Chiang Mai’s growth in recent years, mainly from emerging Chinese tourists besides regular visitors from European countries and Japan.
The company plans to launch its Diamant condo this month on a 10-rai site on Fah Ham Road. Construction will be completed by the end of the year.
“Chiang Mai attracts both Chinese tourists as a second home and Chinese investors who see strong potential from Asean integration,” Mr Somchao said.
With a sales value of 1 billion baht, the Diamant project will comprise six eight-storey buildings with a total of 400 units sized 35-50 square metres at prices starting from 1.79 million baht.
Voradet Sivatachanon, president of property brokerage franchise firm ERA Franchise (Thailand) Co, said the second-home market in Chiang Mai is on an upward trend.
Besides income from tourism and the high-speed train plan, Central Festival Chiang Mai has boosted the province’s economy.
Second-hand single houses must be in the inner city or not far away as new projects are moving to the outer city.
“People in Chiang Mai don’t like to drive up high-rise buildings to park their cars, as seen from Central Kad Suan Kaew, which is not popular because its car park is in the building. This challenges condo projects with car parks in the building,” Mr Voradet said.
Retail giants spur land prices
Late last year, Central Pattana launched the huge Central Festival Chiang Mai. That was followed early this year by the opening of Maya Chiang Mai Lifestyle Shopping Center operated by SF Cinema City.
Many community malls have emerged in recent years. They include Promenada Resort Mall on New Chiang Mai-San Kampaeng Road, The Harbour on Huay Kaew Road, @ Curve Mall on Chang Klan Road and Star Avenue on Superhighway Road.
Platinum, Thailand’s most popular and largest fashion wholesale centre, is constructing a first branch outside Bangkok in Chiang Mai Business Park on Superhighway Chiang Mai-Lampang Road.
Matthew Lin, managing director of Chiang Mai-based property developer Summit Global Developments, said prices of land plots behind Central Festival Chiang Mai skyrocketed five-fold in two years from 3 million to 15 million baht per rai.
Over the same period, land prices in the business park doubled to 20 million baht per rai.
“Increases in land prices are driven by landowners, not demand,” Mr Lin said. “They are the second-generation landowners who think land prices should be raised like that.”