We are well into 2019 and the face of the Thailand property market has changed a little since the beginning of the year. CBRE, a key real estate organisation in Thailand, surmised in their 2019 market-outlook report that this year would be “one for the buyers”. We are here to explain how they arrived at their prediction and whether it has indeed played out that way.

HighlightsLet’s have a look at economic factors affecting demand and supply that featured in reports on the Thailand property market at the beginning of the year.

TourismTourism plays a huge role in driving demand for property in Samui, Bangkok, Chiang Mai and many other cities in Thailand. Happily, tourism is up 1.5% in the first half of this year. The Department of Tourism and Sport indicates the line has been towed by the likes of Japan, the US, Malaysia, and most notably India—citizens of which have spent 27% more this year compared to last. Tourism to the South of Thailand has borne particularly positive results. The latest data from Bank of Thailand is especially encouraging, showing an increase in the average daily rate of 7% for the first half of the year relative to the same period in 2018. This amounts to an 8.5% improvement in RevPAR (revenue per available room) when coupled with a higher occupancy rate of 77.35%.

Monetary policyIn their market outlook report, CBRE raised concerns about Thailand entering an increasing interest rate cycle, which would negatively impact local demand for property as well as supply from developers; the mechanisms responsible for this are increased borrowing costs, higher mortgage interest payments and comparatively more attractive returns on traditional savings. Fortunately, the opposite is true for when Bank of Thailand cuts its rates. We saw Thailand’s monetary policy committee stimulating the economy in September following a decision to cut interest rates by 25 basis points (0.25%), and again last month when they cut by a further 0.25% (Thailand has in fact entered an easing cycle). Financing has become less costly for both developers and the public (low interest loans), and people will look to move their wealth as investments like property become better options compared to low-interest-bearing savings accounts—driving both supply and demand respectively. As a nod to this fact, property transactions in southern Thailand have grown by 2,5% this year and are set to follow the same trajectory into 2020.

New tax lawsThe New Land and Property Tax is expected to come into effect early next year. It serves to penalize owners who don’t utilize their land and is expected to lubricate the market in terms of land and property transactions. Although this is perceived as good for the market, uncertainty about exactly how policy changes will play out in real terms always causes apprehension among market participants—in this case, developers. Many developers have shifted focus to selling the remainder of their existing inventory while more comprehensively gauging what the impact of new regulations will be on a fresh wave of supply. As CBRE posits, this is great for buyers, because very valuable properties are being sold at discounted rates.