Has the military killed the property market in Thailand?
Indeed many believe that attracting any kind of foreign investment is impossible due to the military rule, but that is simply not true.
Let’s start with a bit of history to better understand the current situation.
Since Thailand became a constitutional democratic monarchy in 1932, politics in the country have followed a cycle that looks roughly like this: People become unsatisfied with the current government; Things escalate to the point where the military loses it’s patience and takes over;
For a while, the country is under military rule, until power is given back to the people. Rinse and repeat.
Now, this is obviously a very simplistic way of portraying all the diverse events of almost a century of political evolution, but it serves the purpose of illustrating that what is currently going on in Thailand is little more than “business as usual”.
Those seeking to better understand this would do well in reading this Wikipedia article.
Now the question still remains: does the current political situation in Thailand make the country unfit as an investment target? Let’s examine the evidence:
The relative strength of the Thai Baht
One of the most interesting factors is obviously the stability of the Thai currency in relation to some of The World’s most influential currencies.
Sure, the Thai Baht took a hit immediately following the military coup in May of 2014.
Since then though, the Baht has remained remarkably strong, and is stronger now than it has been for a very long time.
Figure 1: The chart shows the exchange rate for THB/EUR as it has developed over a year since March of 2014. As is evident, the Thai Baht has only grown in strength in relation to the Euro. Obviously, this is also due to the stagnation of the Eurozone economy, but it does paint a clear picture of Thailand as a very reasonable place to invest your Euro.
Let’s have a look also at USD and CNY as well. Both currencies that have been fairly strong in the world markets for the past year.
Figure 2: Notice how the THB/USD and THB/CNY exchange rate as remained remarkably stable for the past year. The exchange rate against the dollar fluctuating with well under 2/10th of a Cent, and less than a Jiǎo in relation to the Yuán.
Clearly, the Thai Baht has not taken a monumental beating as a result of the coup — or the military rule that followed it. Why is that?
The role of The Monarchy in Thailand
In order to understand why the military rule has actually strengthened the Thai economy, it’s important to understand just how much the Thais love their king.
The current King of Thailand is Bhumibol Adulyadej, who has been in power since 1946. He is insanely popular with the Thais, because he has always come out to meet his people face to face — as much as it’s possible for a king.
But not only that, the predominantly Buddhist nation of Thailand believes that the king rules by divine power, and many see him as almost a demigod.
Since the King is the head of the Thai armed forces, many Thais actually see the military intervention as an act of The King. Despite the fact that the hospitalized king probably had little to nothing to do with the coup.
To the vast majority of Thais — and even many expats — the military intervention was a good thing, and most people truly believe that Thailand is much better off now than it was before the coup. In a whole lot of ways, they are right.
A Daunting Task
As Pisit Leeahtam and Cynn Treesraptanagul from Chiang Mai University point out in this small piece from October 2014, the new government has their work cut out for them.
The Thai economy suffered a lot from the unrest and turmoil that preceded the coup in 2014. But even before then, the failed rice scheme that led to former prime minister, Yingluck Shinawatra, being ousted in 2014, had caused a great deal of damage to the national economy, and — perhaps more importantly — had strengthened the public belief that supporting the government, through taxes and hard work, was futile, because the government could not be trusted.
Leeahtam and Treesraptanagul are cautiously sceptic in their analysis of the situation, but they also point to some of the things that have since caused a lot of positive development.
They talk about the massive 2.4 trillion Baht infrastructure development plan, which has already resulted in a large number of massive construction projects all over the country.
They also mention the upcoming integration with the ASEAN Economic Community, which is expected to change the face of trade in the region when 10 countries join financial forces by the end of this year, to become a unified economy with a total GDP of a whooping $2.5 trillion.
Sceptics point out, that this union may not be so good for some of the less developed member countries, but Thailand stands to benefit from the union. Not least because of Thailand’s thriving automotive industry. As McKinsey & Company point out in their detailed report from October 2014:
“Although growth [for the automotive industry] has stalled in 2014 in the wake of Thailand’s political unrest, the [automotive] industry enjoys solid long-term prospects as incomes rise and consumers across the region can afford cars for the first time.”
Although the automotive industry may not be related to the property market, there are huge similarities between the two, and many of the things that can be said about the automotive industry also hold true for the property market. Not least in regards to the long term prospects. Let’s explore this a little further.
Prospects for the property market in Thailand
Thailand has long had a very thriving property market. It’s no secret that it took a temporary hit by the coup in 2014, but it has since recovered quite well, and we continue to see new development projects and foreign investments.
In other words, the major investors have not lost faith in Thailand.
It is of equal importance that the current government completely understands just how crucial it is for Thailand to continue to attract foreign investment.
They have absolutely no interest in making it harder for foreigners to invest in Thailand, since that would be hugely counter-productive.
Also, the new government is quite eager to prove to the world that they are currently the best solution for Thailand. Putting up roadblocks for foreign investors would not really help them in that regard.
Finally, despite growth indicators not being overly impressive for 2014 and 2015, foreign investors continue to have faith in Thailand as a place to invest, as is evident in this article about US investors.
This is very indicative also of the situation in regards to property investment. The major players have not lost faith in Thailand at all.
If anything, their faith has only been restored by the new government.
So, let’s take a closer look at 3 of the most important reasons why now is a good time to invest in property in Thailand. And what type of property investment you should be looking for.
The 3 biggest reasons to buy property right now
So, we have explored some of the reasons why it’s still safe to invest in Thailand, but what are the main reasons to invest in property?
Value for money
The property market in Thailand offers a lot of value for money. With fully furnished western style studio condos starting as low as 7-800,000 Baht, it’s clear to see that prices are very reasonable.
Combine that with the high build quality of most recent developments, and things become even more interesting.
The low cost of living further adds to the total value of your investment. Even house help, cleaning, laundry services and furniture is very reasonably priced in most areas.
Time for a scoop
One of the most interesting prospects of investing right now, is to take advantage of the temporary slowdown that some areas have experienced due to the coup and the new military rule.
If you are looking to buy a condo or house for yourself, there is no better time than now to invest. You are more likely to get a good deal from a motivated seller, and, if you are looking for a more long term investment, this is also a great time to invest.
There are many examples of people saving hundreds of thousands of Baht on high quality houses and condos. Making it highly attractive to invest in something that perhaps you normally could not afford. Now is the ideal time to find a property scoop!
Thailand is unique
Finally, and this has nothing to do with money, Thailand has a couple of very important things going for it, that no other country can quite match.
* The weather in this country is amazing, and the country is not really plagued by many of the extreme weather phenomenons that frequently hit other countries in the region.
* Thailand has amazing food! Everything the heart desires from fresh fruit to wonderful local cuisine, that will set your soul — and mouth — on fire.
* And most importantly, the people of Thailand are still as smiling and friendly as they have always been. Violent crime rates remain among the lowest for the region, and generally the country is a very safe place to live.
Taking all these factors into consideration, it should be quite clear that Thailand is still a perfectly safe place to buy property.
You need to exercise the same level of caution as with any other investment — and seek the advice of locally based experts, but you should in no way let the current political situation deter you from investing in property in Thailand. Quite the opposite in fact.
If you are interested in learning more about current investment opportunities — be it for pure investment or for taking up residence here — don’t hesitate to contact us.
We have decades of experience with the Thai property market, and we are more than happy to assist you in finding just the right property to match your needs.