Looking at the World Through Rose-Coloured Spectacles
A More Stable Real Estate Sector
As discussed above, there is little to no borrowing in the foreign property market in Thailand, which is generally a positive for the market as a whole.
A credit crisis typically inflicts the greatest immediate pain on the property sector. If borrowing were available to foreigners, Phuket property would probably see a boom like no other. Like most booms, we would expect it to be followed by a speculative bubble and a painful crash.
While it may be possible to secure a loan from a Thai or foreign Bank in Singapore, this is extraordinarily rare. No borrowing means no leveraging of loans, which in turn means less speculation and greater stability.
Thai nationals, on the other hand, can and do get mortgages, but the developments which target Thais are not necessarily the same ones marketing to foreign buyers. We do know of a handful of foreigners married to Thais who have managed to get mortgages, and we know of some wealthier Thai nationals who have borrowed to purchase property in predominantly foreign owned resorts. These are exceptions to the rule.
By restricting borrowing, the government is able to smooth out the peaks and troughs normally found in other real estate markets around the world. At the same time, rather than being wholly dependent on the strength of the Thai economy, there is an entire segment of the Thai property sector which follows more closely western economies, including US or European interest rate shifts.
Positive Effects of Inflation
Inflation can negatively impact certain sectors of the economy (see “The Negatives” below), but generally it is good for house prices.
The current global economic phenomenon of money creation and low interest rates is basically Economics 101, telling us that more money chasing the same amount of goods is inflationary.
The main driver of this was the post-2008 quantitative easing in the United States, which flooded the global economy with trillions of dollars. Money was created out of thin air, and it had to go somewhere. Much of it went into global stock and property markets.
Thailand was not really party to the creation of this global liquidity, but it was certainly a beneficiary of it.
Investors from around the world came to buy Thai property, and increased demand, coupled with global money creation, has driven the price of Thai property higher. As mentioned previously in this guide, these price increases have not been excessive, as other factors have kept Phuket from entering bubble territory.
Higher prices are nevertheless welcome for anyone who has bought during the last decade.
Global Marketing as a Key Driver
For many years now, global marketing strategies have had a significant impact on the Phuket property market and has certainly been a key driver leading up to 2019. Properties are not only being promoted to those who already live in Thailand (or surrounding countries) or to people visiting on holiday.
Phuket now receives incredible exposure to the international market, with homes and condos here being marketed and sold to overseas buyers. Many developers even have offices in overseas cities, although one of the key drivers in the past, China has obviously come to a bit of a standstill. Nevertheless, many overseas companies still market Phuket property and no doubt Phuket developers will still attend international property shows around the world to promote their projects.
These global marketing efforts not only put Phuket on the map but also attract buyers from North America and Europe, as well as closer to home in Hong Kong or Singapore.
As the tourist sector picks up after Covid, we do see more interest from foreign buyers looking to purchase purely as an investment. As they are mainly attracted by the guaranteed returns, and possibly a free stay in their condo unit or villa, we will likely have to wait for tourism to truly take off again. As the world gets back to some form of normality, no doubt we will once gain see foreign nationals buying in Phuket without even viewing the properties they buy. This may take a while, but in our opinion, no matter what levels of resurgence we see in tourism, we find it hard to believe it will return to the levels experienced in 2018 and before for a very long time, if at all.