Thai Real Estate: Popular Yet Overvalued – InvestAsian

 Compared to Bangkok’s real estate values, prices in neighboring capital city Kuala Lumpur are about half the price.

Mid-Term: Thai Real Estate Values Are Too High

Wealthy buyers from China, Singapore, India, and elsewhere are still flocking to the Thailand stock market.

To be fair, from their perspective, they consider Thai real estate prices as much lower compared to buying property in their home countries. They use this as a justification for making an investment here.

That’s a big mistake though. Sure, a condo in Bangkok costs roughly 25% of a comparable one in Singapore. Yet Singapore’s per capita income is also around six times higher than Thailand’s, while its scarcity of land helps drive up prices as well.

You could maybe justify expensive Thai real estate values if it had better economic growth prospects. After all, even if locals can’t afford a property at current prices, their purchasing power would soon catch up in a country growing by 6% or more per year like Vietnam.

Unfortunately, rapid growth hasn’t been the norm in Thailand for quite some time. It now ranks among Southeast Asia’s weakest economies.

Out of all ten countries in the region, only Brunei saw slower growth than Thailand since way back in 2015.

Do you really want to buy property in Thailand, which is Southeast Asia’s second-weakest economy?

Thailand’s average annual GDP growth appears stuck in the sub-3% range. Meanwhile, more developed markets such as Malaysia are outpacing them.

We had a different opinion in 2012 back when Thailand’s economic future was better and property values were 50% cheaper. A weak economy, combined with high condo prices relative to neighboring countries, doesn’t indicate a bright future though.

The situation looks even worse after you add rising consumer debt levels to the large pile of economic issues in Thailand.

Long-Term: Thai Population Decline Imminent

You might already know about Japan’s demographic problems. Following its long boom period last century, Japan’s economy has been stagnant since the 1990s. That’s partly because of their declining and rapidly aging population.

The same thing will happen in Thailand but with a very important difference. It won’t become a developed country before its population starts falling.

In other words, Thailand will be one of the first places to grow old before it’s ever wealthy. We therefore don’t think the Thai stock market enjoys solid long-term prospects.

This post was originally published on 3rd party site mentioned on the title of this site