Chinese Tourism Offers Residential Developers Growth Opportunities

Transcription

1 Thailand Chinese Tourism Offers Residential Developers Growth Opportunities Chotika Tungsirisurp Associate Director Research & Consulting Ratha Techasopapan Analyst Research & Consulting Thailand remains appealing for most residential condominium investors due to the relatively low prices of real estate and reasonably high rental yields. The purchasing conditions in Thailand are also less complicated compared to a lot of other countries, with relatively low down payments and small transfer fees. Previously, the majority of foreign condominium buyers in Thailand were predominantly from Hong Kong or Singapore whilst Chinese demand was minimal. Due to weak domestic demand over the past two years, Thai developers have been expanding their customer base by holding overseas marketing campaigns and there are more Chinese buyers purchasing condominium units in Bangkok and other major tourist destinations in Thailand. This Viewpoint by CBRE Research Thailand explores and evaluates the opportunity for developers in Thailand seeking to attract Chinese investors in the long term and provides recommendations on the key factor to increase the exposure for residential development in Thailand to foreign purchasers. September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 1

2 TOURISM OFFERS D EVELOPERS NEW GROWTH OPPORTUNITIES KEY ASI AN FEEDER MARKETS Source: CBRE Research Thailand, September 2017 CHINESE INVESTMENT TREND S According to Baidu, China s top search engine and web portal, Thailand ranked as the 7th country in the world where Chinese searched for real estate investments in 2016 and ranked second among South East Asian Countries after Malaysia. Based on Baidu s statistics, of the total Chinese capital invested in Thailand, approximately 50% was for investment purposes. Chinese investors most often buy properties that are priced below THB 10 million and primarily located in Downtown Bangkok or midtown areas with easy access to mass transit stations. They also purchase in tourist hubs such as Chiang Mai, Pattaya, and Phuket. September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 2

3 CHINESE INVESTORS IN MALAYSIA Malaysia, which is the first country in SEA where the Chinese look for property investment, has had better market exposure as many developers have implemented long-term overseas marketing campaigns over the last 10 years. The government offers a long term visa that allows foreigners to stay in Malaysia up to 10 years with loans being available to purchase a property under the scheme called Malaysia My Second Home (MM2H). Developers who marketing their projects overseas usually include the introduction of MM2H to foreign investors as one of their promotion tools. There is a minimum price for property purchased by a foreigner and it is possible for foreigners to buy freehold land in Malaysia. Despite strong marketing, growth in foreign sales in Malaysia has only been seen since 2012, particularly in Penang LOCATION COMPARISON B ETWEEN THAILAND AND MALAYSIA In Malaysia, Kuala Lumpur and Penang are the two most attractive locations for foreign investors. This is similar to Thailand, where Bangkok and Phuket are the perennial favorites of foreign investors. Bangkok and Kuala Lumpur, both being capital cities, have similar characteristics such as extensive infrastructure and facilities and amenities. Likewise, Phuket and Penang are both resorts popular for holiday homes. Bangkok Kuala Lumpur Phuket Penang September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 3

4 OPPORTUNITY FOR THAILAND The Thai market is still a relatively new market for Chinese residential real estate investors compared to Malaysia, which has been popular with the Chinese for over 5 years. As a result of today s growth in the popularity of Thailand, as a Chinese tourist destination, there is greater potential for Thai developers to expose their residential developments to overseas buyers. CHI NESE TOURI S M GROWTH Within the past 5 years the number of Chinese tourists visiting Thailand has increased eight-fold from approximately 1.1 million in 2010 to approximately 8.8 million in Figure 1 : Number of Chinese Tourists Arrivals in Thailand ,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, ,757,466 7,935,134 4,637,335 4,636,298 2,786,860 1,122,219 1,721, Source: Office of Tourism Development, September 2017 FOREI GN OWNERS HI P REGULATI O N I N MALAYSI A AND THAI LAND Malaysia s foreign ownership regulations differ from Thailand s, offering more opportunity for foreign investors. Even though, all foreign property purchasers have to receive state approval, foreigners can own any type of property in Malaysia with some exceptions such as on properties valued less than RM 1 million (THB 8 million) for the majority of the states and RM 2 million (THB 16 million) for Selangor and Penang Island. Foreigners are also subject to restrictions on Malay Reserve Land. September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 4

5 In terms of financing, the MM2H holders in Malaysia can obtain the property mortgages up to 80% of sales purchase agreement price while non-mm2h holders generally obtain approximately 70% of the property value. Thai foreign ownership regulation does not allow foreigners to own freehold land but allows foreigners to hold freehold ownership of up to 49% of saleable area in a condominium. All the money used to purchase a condominium by a foreigner needs to come into Thailand as foreign currency. Foreign buyers cannot borrow locally in Thai baht and there are few overseas banks willing to lend in foreign currency to fund a Thai property purchase. This means that most foreign purchasers have to be cash buyers. Table 1: Comparison of Foreign Ownership Regulation on Residential Freehold Condominium in Malaysia and Thailand Freehold Condominium Malaysia Eligible for foreign buyers Thailand Eligible for foreign buyers Law and Restriction Properties valued must be more than RM 1 mil (THB 8 mil) and RM 2 mil (THB 16 mil) for Selangor and Penang Island Cant purchase a low and medium cost residential units defined by state authority Cant purchase properties standing on Malay Reserved Land Can purchase up to 49% of total space of all units in the condominium project Financial Restriction Approximately 80% loan amount for MM2H holders Approximately 70% loan amount for non-mm2h holders Foreigners are prohibited from taking loans in THB due to Foreign Ownership Regulations Source: CBRE Research Thailand, September 2017 September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 5

6 CONCLUSION & RECOMMEND ATION The number of Chinese tourists to Thailand is expected to continue growing. As these tourists become more familiar with Thailand, more of them will want to purchase property. In order to increase Thailand s residential development exposure, developers should continue to improve construction quality, design and safety to be competitive with other investment destinations. There are challenges in tapping the Chinese market with capital controls on how much money a Chinese National can bring out of China and restrictions on capital outflows for property investment. To further attract Chinese investment in the long term, developers need to understand the demand criteria and produce the right products that suit Chinese buyers required specification, including Chinese promotion materials and Mandarin speaking sales staff. Another important area is to provide a high standard customer service throughout the transaction process, especially in providing transparent transaction terms, fee structures, taxation regulations, and transfer processes for foreigners which will help in gaining the trust of international buyers and increasing customer loyalty as well as in making them recommend projects in Thailand to other buyers. September 2017 CBRE Research 2017 CBRE (Thailand) Co., Ltd. 6

7 For more information about this ViewPoint, please contact: Research & Consulting, Thailand James Pitchon Executive Director t: +66 (0) e: Chotika Tungsirisurp Associate Director t: +66 (0) e: Thatchanan Siddhijai Manager - Office t: +66 (0) e: thatchanan.siddhijai@cbre.co.th Tornbonkot Patcharaprakiti Senior Analyst Apartment & Investment t: +66 (0) e: tornbonkot.patcharaprakiti@cbre.co.th Chutanuch Vongsiridej Senior Analyst Hotel t: +66 (0) e: chutanuch.vongsiridej@cbre.co.th Ratha Techasopapan Analyst Condominium t: +66 (0) e: ratha.techasopapan@cbre.co.th Warunchai Athigapanich Analyst Retail t: +66 (0) e: warunchai.athigapanich@cbre.co.th Natwatoo Rattanapairote Analyst - Condominium t: +66 (0) e: natwatoo.rattanapairote@cbre.co.th Charit Setsuwan Analyst Industrial t: +66 (0) e: charit.setsuwan@cbre.co.th Korn Supappoj Analyst - Housing t: +66 (0) e: korn.supappoj@cbre.co.th Pattaratorn Pornsirikul Analyst Serviced Apartment t: +66 (0) e: pattaratorn.pornsirikul@cbre.co.th Aishwarya Bajaj Analyst - Hotel t: +66 (0) e: Aishwarya.bajaj@cbre.co.th Thawini Veraphong Analyst Retail t: +66 (0) e: thawini.veraphong@cbre.co.th All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only, exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.