Thailand's real estate boom: the impact of Chinese investment

A boom in Chinese investment has driven up real estate prices. Does Thailand's new government have a plan to manage the fallout?

The city of Pattaya in Chonburi province, Thailand, a popular destination for foreignreal estate investors. Credit: Depositphotos

Thailand's real estate has recently increased significantly, and this can be attributed to the policies of the previous government. Despite being in office for only a month, the new Prime Minister Sretta Thavisin has been actively cooperating with China, especially in the areas of tourism, trade and investment. Attracting private Chinese investment in Thailand's real estate sector is an important aspect of this bilateral relationship. However, it may not directly address the issue of affordable housing for Thai citizens. This investment, while economically important, is only one aspect of the broader economic relationship between the two countries. Addressing affordable housing and other socio-economic challenges may require separate policy discussions beyond foreign investment.

The real picture of real estate

To fully understand the current situation, one should refer to statistics from the Real Estate Center (REIC) and the Government Housing Bank (GH Bank). In the first half of 2023, the number of apartment sales to foreign customers in Thailand rose 14.7 percent year-on-year, with foreign buyers now accounting for 10.8 percent of the sector. Chonburi, a picturesque coastal province, leads with 43.4 percent of foreign apartment sales, not far behind Bangkok with 37.7 percent. Chinese buyers dominate, accounting for 47.0 percent of apartments sold to foreign buyers and 48.3 percent of total transaction value, underscoring Thailand's continued attractiveness to Chinese investors. Russians also play a significant role, purchasing 9.6 percent of apartments and accounting for 7.3 percent of total transaction value. While these developments may not directly impact broader diplomatic relations, they promote economic interdependence and cooperation, potentially creating more opportunities for trade and investment between Thailand and China.

Why the Chinese focus?

The significant influx of Chinese money into Thailand's real estate sector reflects the government's long-term goal of strengthening economic ties with China. This is in line with past practices of prioritizing Chinese investment due to its ability to create jobs, improve infrastructure and promote tourism, all of which together contribute significantly to Thailand's economic growth and stability. However, the issues of housing for Thai nationals must also be addressed. Thailand is currently facing a serious housing crisis as real estate prices are outpacing income growth, pushing many into poor housing conditions. This crisis may be exacerbated by increased foreign investment, especially from China, which has already led to rising real estate prices and worsening housing affordability. While only a few apartments are being bought by foreigners, this could indirectly affect the entire housing market.

Influence of private Chinese investors

The growing number of Chinese private investors in Thailand's real estate market is causing significant concerns among Thai property buyers due to the obvious impact on real estate prices. One of the most noticeable impacts is the significant increase in property values, especially in prime urban and scenic areas. Chinese investors are showing strong interest in luxury properties in popular locations such as Bangkok and coastal provinces including Chonburi. Their demand for luxury apartments, villas and prestige housing has led to record levels of real estate prices in these regions. This increase in demand is making it increasingly difficult for local buyers to afford homes in areas they previously considered affordable.

In addition, the impact of foreign and Chinese investment is spreading to surrounding areas, causing a spill-over effect of rising real estate prices. As property prices rise in Chinese preferred locations, neighboring areas are also seeing an increase in property values.

In addition, the concentration of Chinese investors in the luxury real estate market has changed the overall picture of the real estate market. Many real estate developers have shifted their focus to meet Chinese demand, resulting in a shortage of affordable housing options. This makes it increasingly difficult for middle class and low-income buyers to find a suitable home. Transparency and strict regulatory rules are key. Enforcing stricter foreignreal estate ownership rules can help control the impact of foreign investment on real estate prices while maintaining fairness. Public housing programs for low-income citizens should be launched to narrow the housing gap and improve the quality of life for Thais. At the same time, policies that promote local economic development and citizens' purchasing power in the real estate market can create a more sustainable and self-sustaining economy, which will be beneficial to both local people and foreign investors.

Balancing economic growth and social welfare

Thailand's booming real estate market, fueled by Chinese investment, offers economic benefits and strengthens international ties. However, it also contributes to a shortage of affordable housing for locals. Balancing economic growth with social welfare is a central challenge for Thailand. The government must take decisive action to address the housing crisis by prioritizing policies that guarantee inclusion and well-being for the entire population. This is important to maintain Thailand's attractiveness for foreign investment and ensure the country's long-term prosperity.