(2) Market Watch

MARKET WATCH

Compiled by : Rachel Williams

Outside

Looking In Since the mortgage crisis began in the US two years ago, the world has tumbled into economic crisis, with leading countries such as the US and the UK experiencing their worst economic decline for many years. At the time the crisis began, Thailand was enjoying a boom in the property market as awareness of this eastern tropical paradise spread west.

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s the knock-on effect of the world economic crisis reaches Thailand, property developers are certainly feeling the pinch this year with a significant drop in activity. Many developers have experienced a slow down in construction, sales have declined and some projects are on hold until signs of recovery are back. So what do overseas investors now think about Thailand? Is their dream of a second home no longer a reality? Are buyers disillusioned with life in the rat race and now looking to emigrate? Tropical Living asked a number of real estate professionals from the US, UK and Hong Kong about the current sentiment in their home countries and how overseas buyers now perceive Thailand as an investment opportunity.

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Des Rowson, Rob Mehta,

chairman, NAEA Essex branch

CIPS (certified international property specialist), President RE/MAX Real Estate Group, US

What is the current state of the US property market? “The US real estate market right now is very fractured. Although we have had about three to four years of a down housing market, there are some areas of the country that are already starting to see signs of recovery. Some of the areas that were hardest hit early on, such as Arizona and Florida are among these early resurgences. Areas that did not experience such a phenomenal run in appreciation, but still saw quite a gain in values, such as the Minneapolis-Saint Paul, Minnesota market where I have my US office, are also starting to turn the corner. That being said, the majority of the country is still experiencing the hangover of an incredible run in property values from 1998-2005, generally speaking. As the US economy has now also been hard hit with unemployment and the stock market scandals, these things have only hurt the housing market even more.”

What are the most popular overseas destinations that US residents like to purchase property? “US second home buyers typically look to Central America, South America, and the Caribbean markets for second home opportunities. Countries such as Mexico, Costa Rica, Belize, Honduras have been favourite destinations, as well as islands such as Aruba, Turks and Caicos, Bahamas, and the Dominican Republic.”

How do US property buyers currently view Thailand as a country to invest in? “Thailand is still a very new concept to American buyers. Three years ago, when I partnered with our local firm in Bangkok to market Thai properties to US buyers, my excitement was met with a bit of

How is the UK property market bearing up during these difficult economic times? puzzlement and bewilderment. Even today, I get such questions as the liveability in Thailand, surprise at how expensive or inexpensive it is, and sometimes questions as to why someone would want to buy there. Our typical buyer is generally looking to retire in Thailand, so the distance is not as big of an issue for this type of buyer, as their trips to the US will be very infrequent. Of more recent concern has been the political situation in Thailand, as that has worried many US buyers, since Thailand has regularly been in the news because of the often over exaggerated situations the press finds to report. Worries of property rights typically top the list of concerns, as no one wants to invest in a country where they feel that their investment or well-being might be in jeopardy.” RE/MAX Real Estate Group Recognised by the home buying and selling public for its red, white and blue hot air balloon logo, RE/MAX has been the No.1 residential real estate network in Canada since 1987 and is a leading industry force in the United States and many other regions. The most significant growth for RE/MAX in recent years has come from expansion into Africa, Asia, Australasia, the Caribbean, Central America, Europe and South America.

marketing director, IP Global Limited, Hong Kong

Do you currently promote investment in Thailand?

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Linda Travella, media spokesperson, NAEA International

Have you seen any trends emerging amongst Britons with regards to overseas property markets?

Richard Edgar,

“With regards to ‘Brits’ the trends for overseas homes tends to be people not wanting to risk but to purchase property where they feel ‘safe’ and they are not in general looking to try new countries, so they are not, at present steering away from Europe. Italy has held up the best in the ‘crisis’ with new build prices only down by 5% overall and a general drop of about 8% according to the CEI. However I do feel that once the market picks up Thailand may well be a country that people will look at much more seriously, as an exotic destination and an alternative to places such as Dubai where the second home market has almost completely collapsed. There is no increase in the number of people emigrating at the present time again due to the fact that they are finding homes in the UK more difficult to sell and of course the prices have dropped so they are not able to realise as much capital appreciation as they had hoped.”

spokesperson, NAEA International

Why do you think UK property buyers chose Thailand as a location to invest in property? “Thailand is the epitome of paradise, boasting white sand beaches, a vibrant capital city and a unique culture. A popular tourist destination for years, the country is in the process of successfully transforming itself from a backpackers dream to a luxury holiday location. Five-star hotels, golf resorts and gated communities are popping up all over the country, providing a stylish alternative to the budget travelling scene. As a result, the property market has sprung up out of nowhere, with a range of houses and apartments now captivating the attention of overseas buyers.

Julia Wilde,

“2009 has been a year of change for IP, and I’m afraid we are no longer focused on Thailand as an investment opportunity. We’re taking the stance this year of distressed properties so have been looking more towards the UK and US for investment prospects.”

“The market has an encouraging level of new instructions, but the HIP changes are frustrating some and putting others off from selling. There are agents in some areas enjoying slightly more transactions over the month (May) with other areas down, so no set pattern. There are more properties coming on the register for letting with tenants now negotiating downwards, typically 10% against last year. Overall some agents are enjoying more sales but are having to work hard to achieve them.”

IP Global Limited IP Global Ltd was incorporated in Hong Kong in September 2005. Specialising in emerging and recovering property markets, IP Global provides property investment opportunities for clients around the globe. To date, over USD 300 million of property investments has been transacted and managed by IP Global on behalf of private investors.

“Great weather, good food and affordable prices are attracting second home buyers, retirees and emigrants, while a good exchange rate and promising capital growth is bringing in the investors. A low cost of living adds to the package, and a wide choice of direct flights seems to make up for the distance. All in all, Thailand is a country that seems to tick all of the right boxes – no matter what your reason for buying.”

National Association of Estate Agents The National Association of Estate Agents (NAEA) is the UK’s leading professional body for estate agency. Its 10,000 members practice across all aspects of property both in the UK and overseas, including residential and commercial sales and letting, property management, business transfer, auctioneering and land.

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Amous Lee, director, International Investment, Knight Frank, Hong Kong

As the economy weakens in Hong Kong, are more investors looking to property markets overseas for investment?

Do you think the Thailand property market has grown in popularity amongst Kong Kong investors?

“In my view, the economic impact is global not just Hong Kong. Except Hong Kong, being one of the main financial and business centres in Asia, is where many investors are looking closely. Hong Kong investors have always looked for investment locally or overseas for different purposes. We currently see many investors ‘smelling’ for opportunities or best buy property both overseas and locally. For example, given the weaker GBP,

“Thailand has always been one of the most popular travel destination for Hong Kong residents. Given the travel distance, direct flights, good hospitality, food, shopping etc. As such, many investors feel buying a big villa or property in Thailand is relatively cheap compared to the Hong Kong property market. Most investors also like to use this investment property as a holiday home for themselves or their family. The only thing that worries the investors is the political instability situation which may deter many new investors coming into the market. Most of the ‘seasoned’ Hong Kong investors for Thailand properties are not unfamiliar with the possible political changes in Thailand or other parts like Phuket.

USD, AUD and NZD, investors are taking opportunities in both capital gain in their properties and currency exchange. Also, given the prices for properties were in their peak just nine months ago, the prices offered by overseas developers now seems to be very attractive and reasonable. So, many investors are taking a chance to invest but in more cautious order.”

What type of Hong Kong investors are interested in purchasing property in Thailand? “The Hong Kong investors comprise of the local Chinese, mainland Chinese and expatriates in Hong Kong. These investors have different objectives. From our experience, the local Chinese are looking into both investment and partial holiday homes as they do not use the property in Thailand most of the time, except in a few short holidays. Mainland Chinese are mostly looking into investment side while the expatriates in Hong Kong are using the property more for a holiday home and could be a permanent relocation when they decided to retire and do not wish to be back to their own country.”

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“The current biggest concern as a Hong Kong investor would probably be the political issues in Thailand but given all the plus sides of the country, the Hong Kong investors and residents will forget the recent strike pretty soon and be back on track to their investment or holidays to the Land of Smiles again...”

Knight Frank Founded in London over a century ago, Knight Frank with its New Yorkbased partner Newmark Knight Frank is the largest privately owned property consultancy in the world. It has created a network of more than 196 offices in over 38 countries, staffed by more than 6,770 professionals on six continents.