Last updated May 13th, 2019.

Foreign investors purchase Thai real estate more than any other place in Asia. That’s probably because of a strong tourism sector with Bangkok ranked as the most visited city on the planet.

People often come to Thailand, enjoy themselves, and buy property here.

Most foreign buyers were European up until a few years ago, but Chinese investors have since replaced them. Juwai, China’s biggest international real estate portal, lists Thailand as the third most popular market in the world after the United States and Australia.

I spent over eight years living in Thailand full-time and have many good things to say about the country. Furthermore, I own two condos there, have been active in the Thai real estate market for a decade, and speak from experience.

With all that said, I’m not currently positive about the Thai real estate market’s future.

I understand people have said this for a long time. In fact, you can find decade-old forum posts from people shouting doom and gloom. Thai property values have approximately tripled since then with many investors, including myself, achieving great returns.

But several factors have recently made me reconsider my position. There are far better places to own real estate in Asia as a foreigner.

 

Thai Property Values Are Too High

Wealthy buyers from China, Singapore, India, and elsewhere are flocking to Thailand. They see real estate values are much lower than in their own countries and use this as a justification for investing in a Thai condo.

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

You could maybe justify expensive Thai real estate values if their economy had better growth. After all, even if locals couldn’t afford property at current prices, their purchasing power would soon catch up in an economy growing by 6% or more per year.

Unfortunately, that is not the case in Thailand which now has among Southeast Asia’s weakest economies. Out of all ten countries in the region, only Brunei saw slower growth than Thailand over the past few years.

Thailand’s GDP growth remains in the sub-4% range while even more developed markets such as Malaysia are outpacing them. Do you really want to buy property in Southeast Asia’s second weakest economy?

Of course, I had a different opinion in 2012 back when growth was higher and property values were low. A weak economy and less affordable condo prices do not indicate a bright future for Thailand though.

It looks even worse after you add rising consumer debt levels onto the pile of economic issues in Thailand.

 

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 their population starts falling.

In other words, Thailand will be one of the first places to grow old before it’s ever wealthy.

 

Thailand will suffer from population decline starting around the year 2025 – a bad omen for any economy.

 

Obviously, this will have severe economic impacts. Thailand’s aging population will equal a less efficient workforce along with far greater amounts of public funds spent on social security and healthcare.

The same population decline will probably stop Thailand from becoming a developed country. Aging populations are a demographic death knell for just about any economy – and affect real estate prices from Bangkok, to Tokyo, to Moscow.

A weak economy is never a positive thing for property values. Yet more importantly, declining populations inevitably lead toward less demand for all the housing and condominium projects that are now under construction.

Fewer buyers along with an ever-increasing supply of inventory is a horrible combination.

 

You Have Better Alternatives

The opportunity cost of buying real estate in Thailand is simply too great. Why deal with all the negative aspects above when they don’t exist elsewhere in the region?

Cambodia and the Philippines are both growing at a pace of over 7% per year. They each have strong demographics and let foreigners own property on a freehold basis.

Likewise, Malaysia is the only place in Southeast Asia where foreigners can own freehold land rather than just an apartment or condo unit.

Malaysia enjoys strong demographic trends, is growing in the high 4% range, while real estate values are lower than Thailand’s despite being more developed.

If you enjoy Thailand and want to spend some time there, don’t let any of that stop you from making a lifestyle decision and buying Thai real estate anyway. But investors should probably look elsewhere in Southeast Asia.

 

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an international stock trader and property investor based in Thailand, Cambodia, and several other places. Reid manages the world's first and only frontier market real estate fund and has been featured in publications such as Forbes, Property Report, the South China Morning Post, and Seeking Alpha. You can download his free investment guide by clicking here.

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