Why Thai property investors can find reason for cheer in dismal 2025

For a country known as the “land of smiles”, Thailand has had little reason to be cheerful this year. While export-dependent economies in Asia have had a rough time since US President Donald Trump launched his assault on the global trading order, the headwinds buffeting Thailand have been multifaceted and more severe. HSBC said Southeast Asia’s third-largest economy has suffered “a rare misalignment of events” and has been “swimming against the tide for quite some time now”. This is putting it mildly. Thailand can be excused for feeling that it is cursed. First there was the much-publicised kidnapping in January of a Chinese actor by a criminal gang based in neighbouring Myanmar. The incident scared off many Chinese tourists just when arrivals from China – Thailand’s largest source market along with Malaysia – were starting to recover to pre-pandemic levels. In the first half of this year, only 2.3 million Chinese visited Thailand, down by nearly 33 per cent in annualised terms. Then there was the deadly earthquake in Myanmar in March that damaged some skyscrapers in Bangkok and caused the collapse of a building under construction, killing 89 people on the site, mostly workers. Thai politics, a perennial source of instability, added to the country’s woes when prime minister Paetongtarn Shinawatra was removed from office in August because of a leaked recording of her phone call with Cambodia’s former leader in which she blamed Thailand’s military for aggravating a border dispute that led to deadly clashes between the two nations. As if that were not enough, Trump’s decision to impose a 19 per cent levy on imported goods from Thailand was preceded by a front-loading of Thai exports that exacerbated the impact of the higher tariff by contributing to a surge in the baht. While Thailand’s currency has weakened against the US dollar over the past month, it hit a four-year high on September 16, putting the tourism industry under further strain. Last but not least, Thailand’s post-pandemic recovery has struggled to gain traction. Household and business confidence have weakened sharply, deflation has taken root, household debt remains high, and political and policy uncertainty persists. The myriad challenges confronting Thailand are a severe stress test for the country’s real estate industry. “We have faced a series of highly unfortunate events,” said Anawin Chiamprasert, head of research and consultancy at JLL in Bangkok. The shocks, moreover, are particularly ill-timed. A surge in new supply of prime grade A office space has exacerbated the acute imbalances in the sector, with the vacancy rate in Bangkok’s central business district expected to reach 30 per cent by the end of this year. The earthquake has increased the vulnerability of older buildings without major renovations or upgrades, causing them to struggle with “vacancy rates and rental pressure that would have been unthinkable just five years ago”, according to CBRE. That over 60 per cent of Bangkok’s office stock is more than 25 years old adds to the market’s woes. In the hotel sector, the plunge in Chinese tourist arrivals contributed to a 3.7 percentage point fall in the average occupancy rate in Bangkok in the first half of this year to 75.1 per cent. Midscale and group-tour-focused hotels have suffered disproportionately. In fact, the influx of Chinese tourists in Japan and Vietnam “points not to a lack of outbound demand, but to a relative loss in Thailand’s competitiveness”, Knight Frank said. Bangkok’s residential sales market is also suffering. The launch of new housing units by the top listed developers plunged 73 per cent in annualised terms in the second quarter to its lowest level in a decade. The downturn stems mainly from the sharp fall in sales of more affordable units due to mortgage rejections and rising household debt. However, it is not all doom and gloom. In the office sector, the earthquake has amplified a “flight to quality” trend that is transforming the market by “raising the bar for new construction and redefining what tenants consider acceptable”, CBRE said. A new generation of best-in-class buildings in Bangkok’s central business district, including One Bangkok and One City Centre, is commanding hefty rental premiums and achieving high occupancy, entrenching a divide between buildings that have invested in significant upgrades and those that risk becoming obsolete. “Bifurcation is the most accurate reflection of what’s happening in the [office] market right now,” Chiamprasert said. In the hotel industry, the strength of other source markets, particularly South Asia, has helped compensate for the steep fall in Chinese tourists. This has underpinned the relatively strong performance metrics of the sector, with average daily rates in Bangkok up 3.3 per cent in the first half of this year and occupancy in Phuket standing at 79.5 per cent, up 0.4 per cent, data from Knight Frank shows. Luxury and upscale hotels, particularly beachfront and branded resorts, have proved resilient. Thailand remains fertile ground for branded residences, high-end properties associated with well-known brands, especially hotel chains. According to C9 Hotelworks, Thailand has the largest number of launched units available for sale in the primary market among the top markets for branded residences in Asia. Thailand has been extraordinarily unlucky this year, lurching from one crisis to the next. The repeated blows have taken their toll on the economy. Yet parts of the real estate market continue to perform extremely well. The land of smiles is still managing to stay upbeat.

Why Thai property investors can find reason for cheer in dismal 2025

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Even with the economy hit by multiple crises this year, not least a plunge in Chinese tourist numbers, it’s not all doom in the hotel and office sectors

Even with the economy hit by multiple crises this year, not least a plunge in Chinese tourist numbers, it’s not all doom in the hotel and office sectors