Foreign investors choose Thai real estate more than anywhere else in Asia. That’s likely because of a strong tourism sector with Bangkok as the most visited city on the planet. People often come to Thailand, enjoy themselves, and buy property there.

Most buyers were European up until a few years ago, but Chinese investors have 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 five years of my life in Thailand and have lots of good things to say about it. Furthermore, I own two condos in the country, have been active in the local market for awhile, and speak from experience.

With all that said, I’m not 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 with people shouting doom and gloom. Property values have approximately tripled since then with many investors, including myself, reaping great returns.

But several factors have made me reconsider my position. There’s far better places for buying property in Asia.

 

Property Values Are Too High

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

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

You could justify expensive Thai real estate values if the nation had strong growth. After all, even if locals can’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 isn’t the case in Thailand which now has one of Southeast Asia’s weakest economies. Out of 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 more developed nations like Malaysia are even outpacing them. Do you really want to buy property in Southeast Asia’s second weakest market?

Of course, I had a different opinion back in 2012 when growth was strong and property values were lower. A slow economy and less affordable condo prices don’t indicate a bright future though. It looks even worse once you add rising consumer debt onto the pile.

Thai Population Decline Imminent

You might already know about Japan’s demographic issues. Following a lengthy boom period last century, Japan’s economy has been stagnant since the 1990s. This is partly because of their declining, elderly population.

The same thing will happen in Thailand but with an important difference. They won’t be a developed country before their population starts falling. In other words, Thailand will be one of the first places to grow old before they’re wealthy.

 

Thailand will suffer population decline starting around the year 2025.

 

Obviously, this will have a severe economic impact. An elderly population means a less efficient workforce with a greater amount of public money spent on social security and healthcare. It could even stop Thailand from becoming a developed country.

A weak economy is never good for property values and should affect the Thai real estate market indirectly. More importantly though, a declining population leads to less demand for all the housing projects getting built now.

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

There’s Better Alternatives

The opportunity cost of buying property 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.

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

Malaysia enjoys strong demographic trends, is growing in the high-4% range, while property 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 this stop you from making a lifestyle decision and buying anyway. But investors should consider elsewhere in Southeast Asia.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He’s an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He’s been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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