Thailand Real Estate: Off-Plan vs. Resale 2023

When it comes to investing in Thailand's real estate market, you are faced with two main options: off-plan or resale properties. Each option comes with its own set of benefits and drawbacks, so comprehending their implications prior to deciding is crucial. This article will provide a comprehensive comparison between off-plan and resale properties in Thailand, covering Real Estate Trends in Thailand 2023 as well.

What is Off-Plan Property?

Off-plan property is a real estate property that is sold to buyers before it has been built or completed. When purchasing an off-plan property, buyers invest in a project based on the developer's plans, architectural designs, and marketing materials, rather than an existing physical structure. Off-plan properties are typically sold at a lower price compared to completed properties, offering the potential for capital appreciation as the value increases during the construction phase. The process of buying off-plan involves signing a contract with the developer, paying a deposit, and making further payments according to the agreed payment schedule until the property is completed.

What is Resale Property?

A resale property is a pre-existing, completed real estate property that has been previously owned or occupied. When purchasing a resale property, buyers invest in a tangible structure that they can physically inspect and evaluate before making a decision. Resale properties typically have a shorter transaction process compared to off-plan properties, as there is no waiting period for construction to be completed. Buyers of resale properties can take immediate possession of the property and may have the opportunity to negotiate the price with the seller. Resale properties can also provide insights into the neighborhood, property maintenance history, and potential rental income, allowing buyers to make a more informed decision.

Thailand Real Estate Trends 2023

CBRE Thailand's 2023 Market Outlook envisages a resilient trajectory for the Thai real estate sphere, encompassing both off-plan and resale segments. As the GDP is projected to expand by 3.6% in 2023, developers prioritize clearing existing inventories and initiating low-rise residential projects. The commercial and retail sectors foresee a surge in lease transactions and refurbishments, while the industrial and logistics sectors anticipate an upswing in demand. The diminishing disparity between off-plan and resale property prices unveils enticing prospects in capital markets.

The data below delivers a comparative study of Off-plan and Resale Properties in areas including Bangkok, Phuket, and Koh Samui, as per FazWaz's Q1 transaction statistics.

Bangkok Property Market 2023

In Bangkok, rental yields for properties typically range between 4% and 8%, depending on the location, property type, and amenities offered. Bangkok's real estate market is still an attractive destination for investors due to its robust economy, growing middle class, and government infrastructure initiatives. It's important to note that market fluctuations, policy changes, and oversupply of certain property types or areas pose risks and merit expert guidance.

According to FazWaz'sQ1  transaction data, 1-bedroom condos emerged as the most popular, with a total of 38 units sold. This trend was followed by 2-bedroom, 3-bedroom, and studio units, in that order. Additionally, the top areas in Bangkok including 

• Phra Nakhon
• Huai Khwang
• Asoke
• Thonglor

FazWaz's Bangkok Real Estate Market distinctly presents key information about buyers. During Q1, the majority of buyers were Thai residents, as evidenced by the following chart.

However, during the Q1 of this year, a discrepancy emerged in the number of Off-plan Properties and Resale Properties. This indicates that buyers consider these factors before their purchase decisions. The Bangkok real estate market exhibited the following figures.

Phuket Property Market 2023

Property rental investments in Phuket, Thailand, can potentially yield significant returns, ranging from 4-10% annually. This depends on factors such as the property's location, condition, and the prevailing market situation. Bang Tao, Surin, Kamala, and Nai Harn are top rental locales, with Patong, Kata, and Nai Harn boasting notable returns. For optimal yields, investors should prioritize properties with favorable locations, good upkeep, and modern amenities.

According to FazWaz's Q1 transaction data, 1-bedroom condos emerged as the most popular, with a total of 22 units sold. This trend was followed by 2-bedroom, studio, and 3-bedroom units, in that order. Additionally, the top areas in Phuket including 

• Choeng Thale
• Kamala
• Patong

FazWaz's Phuket Real Estate Market Report for Q1 highlights key buyer demographics. The market saw significant activity from Russian buyers, followed by those from Thailand, China, Germany, and the UK, as illustrated in the accompanying chart.

From FazWaz's transactions in the Phuket real estate market during Q1, it's evident that the total number of off-plan properties and resale properties is similar. However, for condos, the number of resale property transactions is marginally higher, as demonstrated in the bar chart below.

Calculating Monthly Condo Rentals in Phuket's 2023 Real Estate Market Using the Price-to-Rent Ratio Formula - The price-to-rent ratio is a crucial tool used to gauge the profitability of a property investment. It's calculated by dividing the property's price by the total rent that could be earned in a year. A lower ratio might suggest that it's more economical to buy rather than rent, and vice versa. This formula has been utilized to determine the monthly rental prices for condos in Phuket's real estate market for 2023.

Based on the available information, the average asking price for rental properties in Phuket on the FazWaz website for example: 

• The Aspasia, this unit featuring 2 bedrooms and 2 bathrooms with a usable area of 240 square meters on the 2nd floor, is listed for sale at a price of 18.9 million baht. Its rental price stands at 82,100 baht, resulting in a price-to-rent ratio of 19.
• The Bliss Condo by Unity, this unit is a 57 SqM condo with 1 bedroom and 1 bathroom with a usable area of 57 square meters on the 3rd floor. This condo is available for purchase at a base price of 4.7 million baht. It's also available for long-term rentals, starting from 39,000 baht per month, leading to a price-to-rent ratio of 10.

*The price-to-rent ratio is calculated at the individual home level, where the sales price is divided by 12 times its monthly rent price.

Koh Samui Property Market 2023

The Koh Samui property market has grown significantly, spurred by various factors:

• Natural Beauty: Koh Samui's captivating environment, especially the scenic views from Bophut residences, attract buyers seeking a paradise island home.
• Tourism Influence: The island's tourist appeal fuels the demand for holiday and rental properties. Luxury villas in Maenam, for example, make for profitable rental investments.
• Expat Demand: The thriving expatriate community on the island generates demand for Western-style homes, as seen in the popularity of modern villas in Choeng Mon.
• Lifestyle Appeal: The laid-back lifestyle in Koh Samui is a major draw. Lamai, known for its peaceful neighborhoods, exemplifies this attraction.
• Luxury Options: The luxury villas in Plai Laem and other upscale residences enhance the appeal of the housing market.
• Infrastructure Development: Improved facilities, such as schools and hospitals, and developments like the Raja Ferry Port, make areas like Lipa Noi attractive for long-term living.

The limited availability of condos on Koh Samui amplifies the appeal of homes and villas. FazWaz's Q1 data reveals the top location in Koh Samui during this period was Bophut and Mae Nam. That 3-bedroom houses and villas dominated the sales, followed by 2-bedroom and 4-bedroom units. The average prices for each category are detailed in the table below.

Key Takeaways

According to data from CEOWORLD Magazine, Thailand holds 3 spots in the top 10 global real estate return on investment (ROI) index. Specifically, Phuket, Pattaya, and Bangkok rank 4th, 8th, and 9th respectively, demonstrating their ongoing popularity on the global stage. These locations not only offer substantial ROI but also deliver high rental yields and more. The following table presents the top 10 locations according to this data.

The presented information indicates that both Thai and foreign buyers have a significant presence in the real estate market. However, the Bank of Thailand's decision to reinstate the loan-to-value (LTV) mortgage limit in 2023 may result in domestic buyers taking center stage. The LTV rule restricts the number of loans granted to buyers and is being reintroduced to prevent an increase in household debt. As a result, sales of condos may slow down, prompting Thai buyers to shift their attention to the housing market. Due to the limited availability of condos and the LTV rule, 1-bedroom properties have seen a surge in demand and have become highly sought after by Thai buyers.

FAQs

Q: Are property prices falling in Thailand in 2023?

A: From my perspective, it's unclear whether property prices in Thailand will drop in 2023. Economic factors like oversupply and the potential for rising interest rates could impact the market. However, CBRE Thailand anticipates a steady recovery, particularly in the Bangkok condominium sector.

Q: What is the outline for Thailand’s real estate market in 2023?

A: Despite an oversupply in the 2-5 million baht range and anticipated interest rate hikes, Thailand's real estate market shows promise for 2023. Developers are prioritizing low-rise housing and innovative spaces, while new projects are expected to concentrate in central Bangkok and areas with new train lines.

Q: Where is the best place to buy property in Thailand?

A: In my opinion, top property investment locales in Thailand include urban Bangkok, tourist-heavy Phuket, serene Chiang Mai, conveniently located Hua Hin, vibrant Pattaya, and tranquil, luxurious Koh Samui. Thorough research, considering lifestyle and investment objectives, is advised.

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