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26 Jun 2009

Real Estate and Construction

Global Crisis: Slowing FDI Impacting Thai Property Market (Business Brief No.2544)

The US financial crisis that has devastated financial institutions and funds around the globe has affected Thailand's real estate sector, inevitably. The FDI into Thai real estate business during 3M09 totaled THB7.03 billion, contracting 49.2 percent YoY. KASIKORN RESEARCH CENTER (KResearch) views that some positive signs from the global economy will be conducive to the resumption of foreign direct investment in the Thai real estate market, especially joint ventures in projects with potential. The Thai property market, in comparison to our peers, especially in Singapore and Hong Kong remains quite cheap, which will potentially provide attractive returns in the future. The fact that Thailand is rich in natural resources and appealing tourist attractions should also be a magnet to foreign investors into our property development market.

However, the fledgling signs seen of a global rebound – which may take quite a long time before reaching potential growth – would make it unlikely for Thailand to experience rapid increases in FDI into the real estate market over the remainder of this year. The residential property market for expatriates here hinges primarily on the domestic political situation and tourism atmosphere. KResearch therefore forecasts that FDI into the property sector of Thailand in 2009 may drop 30-40 percent from the value of THB45.24 billion seen in 2008. However, KResearch takes the view that if the global economy resumes its potential growth amid a more stable political environment, the Thai property market would likely see a surge in FDI, thanks to our competitive advantages over neighboring countries. Among them would be the readiness of our infrastructure, sufficient public utilities, in addition to our appealing tourist attractions and residential property prices that remain quite competitive.

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