Are real estate markets and investment set to soar?
Most people would agree that over the years Thailand has done relatively well for itself in attracting foreign investment to the country on its own terms. Whether it is the manufacturing industry, private sector investment or tourism, Thailand has flourished in becoming the world’s 24th largest economy. Now though, one industry in particular will have a key role in determining the development of Association of Southeast Asian Nations (ASEAN)–the real estate industry.
For those who are currently unaware, the ASEAN Economic Community (AEC) is a free- trade agreement project between ASEAN countries (Indonesia, Malaysia, Thailand, the Philippines, Singapore, Brunei, Cambodia, Laos, Myanmar and Vietnam). The AEC aims to make ASEAN a more dynamic and competitive economic bloc by making it a single market and production base by 2015, governed by the principles of an open, outward-looking, inclusive and market-driven economy. As a single market and production base, the AEC comprises the following five core elements:
1. Free flow of goods
2. Free flow of services
3. Free flow of investment
4. Free flow of skilled labour
5. Freer flow of capital
Under the backdrop of regional economic integration and the opportunities and challenges lying ahead of the ASEAN group, discussions at the recent World Economic Forum on East Asia in Bangkok revealed that the real estate industry will need to play a vital role in the growth and development of member states.
Jones Lang LaSalle, a global financial and professional services firm, have been extensively researching the potential impact of the AEC and were prominent speakers at the conference in Bangkok. They highlighted the ten key areas where smart real estate planning and creation will impact on the success of the ASEAN group.
The firm believes that increasing urbanisation will continue, particularly in the less developed ASEAN nations, resulting in demand for housing, offices, retail space and hotels. Furthermore, improvements in infrastructure will mean increased connectivity between ASEAN countries and cities which will lead to further real estate development. The growing affluence of populations will also fuel the demand for housing and increased tourism, both from within and outside of the region.
On the commercial front, a focus on improving health and the increased spending on healthcare will create demand for more hospitals and clinics, while developing industry and trade will lead to increased demand for manufacturing and logistics facilities.
When you consider the aforementioned factors and relate them to Thailand and specifically to Pattaya, it is clear that those of us on the Eastern Seaboard are well-positioned to take advantage of a forecasted boom driven by free trade. While we are already very familiar with the prominent housing and hotel sectors, we have yet to usher in the era of commercial property; set to be spearheaded here in Pattaya by Tulip Group and their highly-anticipated Emerald Tower office development.
However, Thailand does face certain challenges which–if not tackled correctly–could lead to a decline in investment and development levels. Specifically, Thailand must do more to tackle foreign property ownership laws or risk losing out to regional counterparts where the buying process is less onerous.
This was the sobering message delivered by Suphin Mechuchep, managing director of Jones Lang LaSalle Thailand. He said, “Major differences between ASEAN markets such as foreign property ownership, alien business laws and tax systems need to be fine-tuned. Once these areas are managed efficiently, the gap in competitiveness among the real estate markets in ASEAN should become narrower, and every market will then be able to capture most, if not all, of the opportunities that will follow the connectivity and collaboration within the sub-region.”
Although there will be little hope of a regional solution to restrictive regulation in ASEAN countries, it is hoped that the push towards regional integration will spur countries such as Thailand to continue on their path towards liberalisation or risk losing out on investment dollars to other member states.
Watch this space for an announcement on raising the foreign ownership quota in condominiums from the current 49 percent level to somewhere around the 70-80 percent mark! When something like this happens we will know for sure that the impact of the AEC will be positive and far-reaching.