The coronavirus pandemic has been tragic and prolonged beyond most expectations, with a severe impact on economic activity including real estate. Yet, new data suggests that residential property acquisition by buyers from China and other parts of Asia will rebound as the pandemic recedes.
Vaccinations and international travel are the two key factors that will assist in the rebound, according to Juwai IQI, a pan-Asian real estate sales and media group based in Kuala Lumpur.
Foreign condominium purchases in Thailand dropped 34% in 2020, compared with 2019, according to data from the Real Estate Information Center (REIC). The nationalities with the biggest declines were Japan, with 58.6% fewer transactions, and Russia (down 51.4%). Chinese buyer transactions declined only 31.1%.
Bangkok and Chon Buri account for the largest share of foreign buyer transactions, at 80% of all foreign transfers nationwide. The majority of foreign buyer transactions were for properties that cost less than 5 million baht. The median condo price in Bangkok, the country's most expensive market, is now approximately 6 million baht.
Despite the concentration of 77.6% of foreign buyer transactions in the lowest price range, foreigners make up fewer than one out of 10 low-priced buyers in the country.
In the higher price ranges from 5 million to more than 50 million baht, foreign buyers account for as many as one in five transactions.
A full rebound in foreign buying will depend on two factors, said Dr Vichai Viratkapan, executive director of the REIC.
"Since most foreign buyers are Chinese, the first factor is when the Chinese government allows their people to travel overseas," he said. "It is more difficult to sell condos to buyers who have not seen them in person because sometimes you buy only because you fall in love with the property."
The second factor depends not on the government in Beijing but the one in Bangkok. It is the pace of the vaccination campaign.
"Once the government can vaccinate people, having foreign visitors will be safe and it will be possible to restart travel. In the meantime, developers are adjusting by focusing on the domestic market and lower-priced units," said Dr Vichai.
Commentators have proposed several sweeping changes to the regulation of foreign buyers with the goal of increasing foreign investment and stimulating the Thai economy. One proposal calls for the government to raise the foreign buyer ownership threshold beyond its current 49% of available space in any given condo project.
Dr Vichai disagrees, saying he favours more targeted actions to stimulate post-Covid foreign property buying.
"There is no need to increase condo ownership across the whole country," he said. "It is better to focus. We recommend individual projects have the right to increase their foreign ownership threshold, but only in certain areas of Bangkok, Chon Buri, Chiang Mai, Samut Prakan and Phuket.
"The government's goal should be to focus foreign buyer transactions in the higher price ranges. That would prevent foreign buyers from competing with domestic buyers."
CHINESE BUYER FOCUS
After four quarters of rapid, double-digit declines, Chinese residential buying interest rebounded over the past two quarters, based on data gathered by Juwai.
Chinese buyer inquiries about Thai property increased 38% in the first quarter of 2021 from the very low base of a year earlier. It is too soon to know if this rebound will sustain itself for the remainder of 2021. It may collapse in the face of the resurgent pandemic in Thailand.
"The long-term outlook is this: Bargain-hunters are buying now. The boom starts when travel reopens," said Georg Chmiel, co-founder and executive chairman of Juwai IQI Group.
"According to our industry survey, the Thai real estate industry expects average new home prices to decline by 3.9% in 2021. The forecast for used homes is worse, with average prices to decline 6.7%.
"For Chinese buyers, Thailand right now represents an opportunity. Not everyone is brave enough to purchase in such uncertain times, but there are many forward-looking Chinese property buyers who are. They are buying investments, second homes and even future primary residences in Thailand."
Total sales in 2020 to Chinese buyers in Bangkok dropped 50% from 2019, said Somsak Chutisilp, the Bangkok-based managing director of IQI Thailand.
"Before the third wave of the pandemic, there were still many Chinese buyers interested in property in Bangkok and who would like to travel to Thailand as soon as the country opens up. But after the third wave, inquiries from Chinese buyers declined significantly.
"The Chinese still cannot come across to Thailand or most other countries. When it comes to properties valued at less than 1 million yuan (4.9 million baht), we can use social media and live streaming to let them virtually visit properties in Bangkok. This makes the buying decision easier for buyers of both off-plan and completed projects.
"It is more difficult for luxury property, because fewer buyers are willing to make a decision for such a large purchase without coming to visit the property. Even buyers who bought before the Covid period have still not been able to come to inspect their completed residences."
The Phuket property market was hit hard by the pandemic because the industry relies so heavily on tourism, said Nasupha Suwansri, vice-president of IQI Phuket.
Only 1,966 new condos were sold last year in Phuket, compared with 4,036 the year before, she said.
"Chinese interest in Thai properties remains very strong, even if takes longer than expected to get back here. We expect a boom of pent-up demand when the market returns," she said.
"The Chinese economy is recovering very quickly. Chinese consumers have excess savings compared to the pre-pandemic period that they expect to invest in real estate.
"The reopening of travel will definitely increase sales in 2022 beyond the level of 2019."