Integrated Economic Analysis of Thailand Activity in ASEAN

Integrated Economic Analysis of Thailand Activity in ASEAN

The ASEAN Economic Community (AEC) comprising 10 partner countries has started its work in December 2015. The main objective of this community is to facilitate a free flow of investment, labor, trade, and business activity within ASEAN.

The targeting purpose of the Association is economic integration amongst its members and a creation of a single commercial and trade space with a total population of 6.2 billion. Thailand, which has become a so-called engine of growth in the region, plays one of the main roles in this association. In numerical terms, the total increase is evaluated in the range of 7-10%. Another important advantage of the Kingdom is its central geographical location relative to other parties. Powerful financial, inventory and population flows pass through Bangkok and other cities, providing a comfortable business environment. The experts agree that Thailand received the greatest benefit from the establishment of ASEAN. 10 thousand Japanese workers which are employed in the automotive industry and other sectors of Thai industry have become another powerful argument in favor of this assumption.

Challenges and Opportunities in Phuekt Real Estate, Thailand

Stable per capita GDP growth leads to the expansion of the layer called the middle class. The number of newly born children is decreasing, the average age is increasing, but the signing of international agreements with neighbors opens borders to thousands of migrants from poorer areas of this part of the globe that will result in a general increase in the population and its working parts. Citizens of other countries are not granted land ownership rights but they can buy property in condominiums. The maximum percentage of shares for a foreigner is 49%. Return on investment is +5,13 % which is very close to the same index in Japan (the difference is 0,1 %). Political turmoil (coups) and natural disasters (floods) were unable to produce a negative effect on the real estate market in Thailand. After a local financial crisis in 1997 there has been an increase in the vacancy rate of commercial real estate. Villas at Phuket and apartments in Thailand are 90% sold and occupied. The main reason of this prosperous situation is the general healthy condition of this sector which is achieved by the absence of volatility caused by speculators and favorable forecasts of analysts. These forecasts are based on the prospects of open borders and improvement of the transport connection of the country through railways.

Prices are growing

Rapid growth of economy is accompanied by a steady increase in the cost "per square meter" throughout the construction process. A situation in which the prices are getting lower during this time is considered exceptional or force majeure. The price of the well-maintained property at the secondary housing market may exceed the price of a new-built property (for example, by reducing the risks - all systems and communications have been tested in real conditions). The Thais, unlike the Japanese, not only invest in villas and apartments in Phuket, for example, under the lease, but also invest in new-built objects or objects under construction in order to get a profit margin after renting of this object.

Tourists as tenants

Comfortable weather conditions and a variety of high-level affordable property lead to a stable flow of people from all over the world who come here for a summer or winter vacation or for living and working by the warm sea. Affordability of villas and apartments for foreigners attracts investment flows from all over the world. Rental of villas and apartments has become a good alternative to traditional hotel accommodation. It naturally brings the owners of capital to the idea of investing in such real estate.

Low prices and taxes

Let us give one simple example: a thirty-meter apartment in a new-built housing complex with swimming pool and gym may cost around $ 50,000. In addition, local tax laws do not assume any state’s share in the inheritance, if its rating does not exceed 100 Million Baht. In the vast majority of the areas residential buildings are also not subject to taxation. Taxes are also not applied in case of donation (purchase and sales transactions require a separate discussion). Cheap labor of local residents makes communal services very cheap. It is also a great advantage.

Excellent design and technological infrastructure

Nowadays the sector of newly built housing is dominated by complexes with carefully thought-out architecture and design. Technological infrastructure and quality of appliances are also very impressive. Development of real estate in this direction was supported by a change of legislation in 2008 which granted ownership rights over the property to foreigners. There is every reason to assume a further development of this trend. Many of today's condominiums are provided with infinity swimming pools, gyms with the latest exercise equipment, 24-hour security with a hidden video surveillance, tennis and squash courts, restaurants, etc. Today it is a de facto standard for the Kingdom. The price range is quite impressive also – from 60 000 USD to 1 000 000 USD.

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