Foreign Investment in Property Sector Increases

The past 25 years have seen the rapid expansion of Thailand's property market, largely driven by domestic capital, with only isolated examples of international companies making significant investments in leading Bangkok schemes.

This is now starting to change, with tighter domestic bank lending and continued international interest resulting in greater participation by foreign developers in the country.

While the Bangkok property market has made headway in gaining the scale and infrastructure improvements often associated with regional Asian gateway markets, such as Hong Kong and Tokyo, restrictions on foreign real estate ownership and investment have resulted in a comparatively low volume of inbound capital into the property sector.

Joint venture agreements, in conjunction with local partners, are effectively the only way for foreign entities to undertake development activity locally, with the exception of Board of Investment (BoI)-approved hotel schemes.

Although such restrictions are not uncommon regionally, a combination of investment exemptions, or more liberal regulatory oversight, has led to a far higher degree of foreign participation in a number of neighbouring countries.

The recent surge in development activity witnessed in the region's frontier markets, such as Cambodia and Myanmar, has been overwhelmingly fuelled by foreign capital, where the sourcing of international expertise through overseas partnerships is also seen as an added benefit.

The success of domestic companies in autonomously undertaking the development of the majority of Bangkok's flagship schemes has rendered this unnecessary, with the quality office buildings such as AIA Capital Center, AIA Sathorn Tower, Park Ventures Ecoplex and Gaysorn Tower equivalent to those of leading buildings across developed Asian markets.

Increasingly cautious bank lending to developers over the past 12 months, however, has led to a notable increase in Thai developers seeking international capital, with predominately Japanese companies having entered into a new wave of partnerships with local firms.

These aim to build on the success of previous projects, such as those undertaken by Mitsui Fudosan and Mitsubishi Estate in collaboration with local partners.

Chinese groups, by far the most active investors across Asia and accountable for over a quarter of total outbound Asian capital into global real estate, are also showing a growing interest in Thailand, both in terms of Bangkok and resort locations.   

While no fundamental shift in the dominance of prominent local developers is set to occur in the near future, market interest shown by foreign groups in Thailand, combined with cautious domestic bank lending, creates a favourable environment for increased activity from developers across the wider Asia region in country and a clear catalyst for greater inbound investment over the course of 2017.

Source: http://www.bangkokpost.com/business/news/1186521/inbound-capital-in-property-sector-increases