Pattaya Property: The Ultimate Guide to Understanding Pattaya Condo Market (2020)
Pattaya property is one of the more interesting property markets and have seen lots of local and foreign investors coming in. To help them see the market clearer and make better investing decisions, I created this comprehensive, ad-free, unbiased and uninfluenced information to reflect an accurate situation of the market and better understanding of Pattaya real estate.
I provided facts, figures and stats, researched information, surveys and various information from our own research team, my own expertise, and from leading agencies and verified sources, both government and private institutions.
I’d like express my gratitude and thank to all the contributors / information sources, especially to Khun Maneerat Gongsiang, a senior economist at Bank of Thailand, who had been very helpful and kind to provide valuable information that is included in this article. At the end of your read, kindly take a moment to acknowledge the sources.
Table of Content:
- Brief Overview of Pattaya Real Estate
- Understanding Pattaya Location and Structure
- Pattaya’s 5 zones
- Each zone’s average condo:
- Statistics – Condos Constructed, Sold and Unsold
- Sales By Location
- Left Overs
- The Rise of Condo Market – Understanding the Players
- The Russian Influence and Exit (Financial Crisis 2014-2017)
- The Rise of Chinese Capital Inflow
- Thai Buyer’s Buying Behavior and Motivation
- Investor’s Interest in Pattaya Property: Attracting Factors
- Low Price, High Return and Guaranteed Yields.
- Following the followers: Human Psychology in Play
- Property Developer’s Mega Marketing Campaign
- Political Stability
- Location, Location, Location
- Labor Demand
- Understanding Chinese Capital
- Effects on Pattaya Property Market.
- Chinese Developers and Construction Companies
- The Rise of Chinese Capital Inflow
- The 4 Major Forces creating Demand
- Chinese Super Buyers
- Affordable Price, High Gross ROI & Guaranteed Yield
- The EEC Hype – Government & Foreign Investments
- The Market is Crashing (Upside)
- The 6 Major Precautions and Pitfalls
- Strong Thai Baht.
- Chinese Capital Control
- Guaranteed Return on Investment or Yield
- Over Supply & Fierce Competition
- Crashing Real Estate Market
- LTV Effect
- Hunting Real Opportunities (And Decoding Disguised ones)
- Older Condos
- New Condos
- Re-sale Condos
- Guaranteed Yields
- Prime Locations
- Price Range with Constant Demand
- 10.Content Copyright and Usage
- Do-Follow Link
- Anchor Texts
- Jerbit https://www.jerbit.com
- Pattaya Property https://www.jerbit.com/property/pattaya
- Sub-Topic Link: Jerbit: Sub-Topic https://www.jerbit.com/property/pattaya
A Brief History of Pattaya Real Estate
As of late 1960s, Pattaya was still a small fishing town full of trees. Despite it’s small size of 8.8sq. miles and no major jump in population growth, it seriously got urbanized in the last 2 decades.
- In 2009, there were 106,214 people living in Pattaya.
- By 2017, it increased to 117,371.
- A very small increase by 11,157 people.
- And as of 2019, the population of Pattaya was 122,152.
With so less population, what fueled Pattaya property market? Tourism? Yes, but there’s something more hidden. Pattaya has had a constant inbound migration for years. Though the number of residents in the governments stats showed 100k+, the actual number of Thais living in Pattaya is approximated to be around 400,000 people, as of 2015. These are the people that don’t have their addresses registered as a resident in Pattaya but they live there. Then, of course, tens of millions of tourists each year (with an average stay of 3.84 days) All this demanded growth and property construction is at the fundamental level of it.
Brief Overview of Pattaya Condo Market
Pattaya recently has seen another flow of new condo supply into the market. In the first half of 2019, approximately 5,000 units of new condos were built and put for sale. The average absorption rate for 2019 has been at 72% which is 8% lower than the average uptake in the last decade, showing a sign that, Pattaya condo market has not fully recovered from the hit it suffered in 2014.
In the first half of 2019, foreign investments from China and other nations (namely Singapore and India ) became the main customer group. The slowing Thai market, as a result, the overall economic downturn, the upcoming real estate bubble, as well as the impact of the new LTV measures reduced purchasing power and delayed buying decisions of the Thai people that buy condominiums as a 2nd home and for investment.
A large number of uptake of condominiums by foreigners resulted in many sold-out foreign quotas. Many condos in Pattaya have successfully sold 49% of their foreign quota (which is the limit for foreigner quota) but are left with Thai quotas that have proven increasingly difficult to sell.
However, due various economic factors that has been influencing Thai Baht to become stronger has seen foreign investments quickly disappear. Hopefully, the currency situation resolves and sellers can then expect a major rush of sale but before that happens, it may take a quite sometime time. The overall market situation is not as strong as it’s perceived, especially, with property developer’s high activity in the market by launching new projects. As of 2018, there were approximately 12,000 units of condos accumulated and unsold. And in 2019, with new supplies, the number of unsold units went up to 16,000. Knowing this, investors should understand exactly what is happening in the market and, if they want to buy, where to be on the demand side of the market.
Of all the areas, Wong Amat is the area that has the least amount of condos left unsold, primarily because of the limited land availability. Only a handful of condo projects were developed in the last 3 years in Wong Amat. With limited supply, this area sells the most expensive condos and the number of unsold condos in Wong Amat is only 880 units or just 5.5% of the total unsold condos for sale in Pattaya.
Note: These figures do not account for re-sale units available in the market. The statistics are purely of new or first hand condos.
In one of our interviews, we learned that developers were struggling to keep up with Chinese buyers who snapped up 49% of the units available in their project. The developer were left in a situation where they have unsold Thai quotas that were selling slow, and a stream of Chinese buyers demanding for more (in this particular project). All these information send out quite a mixed signal of what an accurate market condition and situation is, right now, but it is clear that Wong Amat is one of the safest areas to invest. There are downsides to this area as well, which is the high price tag and lower ROI, as you will see below.
Start Reading from the beginning: Pattaya Property
Understanding Pattaya Geography & Location.
Pattaya is close to Bangkok which makes its easy for people in Bangkok to travel, and hence many Thai people buy condos in Pattaya a a holiday home as well as for investments which I will be talking about Thai Buyer’s Buying Behavior later in the article. Suvarnabhumi International Airport itself is located in between Pattaya and Bangkok, which makes it convenient for tourists to visit both the cities.
Saying that, Pattaya, itself, is not a city, it’s situated in Chonburi which is a city. Pattaya is divided into 5 zones as follows
Wong Amat or North Pattaya is the posh area of Pattaya. Most of the 5-star hotels are situated here. It’s not one of those super busy areas, but it’s filled with expensive restaurants and high-end condominiums. Condominiums in this area is the most expensive in all of Pattaya with average pricing between 70,000 to 130,000 baht/sq,m or an average of 100,000 baht/sq.m. The average rent is around 30,000-80,000 baht, with those figures, one can expect around 4-6% return on investment.
Central Pattaya is the happening area of Pattaya. It is full of shopping malls and entertainment areas such as Terminal Pattaya, Central Festival Pattaya, Index, King Power, as well as numerous restaurants. This is the area that the tourists pours in, especially the foreigners. Here, you will find different kinds of condos both beachfront and in close vicinity to the beach surrounded by all the conveniences one may need. The re-sale condominiums in this zone cost between 60,000-100,000 baht/sq.m, for which one may expect a rental of around 16,000-55,000 baht per month. And no doubt, being the most sought after location, Central Pattaya has the highest rental yields compared to other zones, with gross yields of up to 4-9%.
Pratumnak (pronounced Pra-tam-nak) This is arguably most beautiful area in Pattaya. Condos in this area have both mountain and sea views, and it’s a quieter residential zone, less entertainment yet very near to Central Pattaya. Due to the limitation in land area, this zone doesn’t have many tall buildings for both hotels and condos, making it more sought after by buyers who want to be in a quieter zone, but only adjacent to the vibrant Central Pattaya. The prices for re-sale condos in these areas cost around 50,000-80,000 baht/sq.m. The rental income is approximately 12,000-45,000 baht per month, with gross ROI of about 4-6%.
Jomtien, If you visit Jomtien, you will see a different side of Pattaya. It’s popular for its famous restaurants and a more calmer environment. There are many 3-4 star hotels and other smaller high quality hotels which is perfect for a vacation without focusing on heavy travel or entertainment. Food and restaurants are cheaper in this area and it’s more a livable area. Jomtien is big and has good size land area for development of many projects. The re-sale or second hand condos in this zone is cheaper than other zones in Pattaya costing around 45,000-70,000 baht/sq.m. The rent in this area is approximately 11,000-27,000 baht per month, with Rental Yield of about 6-8%.
Na Jom Tien, is next to Jomtien and is even quieter than Jomtien, in fact it is the quietest area in Pattaya. It’s best suited for families that really want to relax and be with the nature. Renting accommodations and condominiums is higher than Jomtien making the re-sale condo prices to be around 55,000-100,000 baht/sq.m rent of about 24,000-55,000 baht per month, which will yield a gross ROI approximately 4-7%.
Start Reading from the beginning: Pattaya Property
The Rise of Pattaya Condo Market.
A serious supply of condo started around 2010 and the town grew like never before. Pattaya attracted both Thai and Russian tourists, expats, investors, holiday home buyers, and retired people. The vibrant Pattaya attracted more foreigners from other nations as well, but Russians were the biggest in number as foreigners, and were spenders.
Real estate market was booming, especially the condominium, apartment and hotel sector, attracting interests from property investors and developers. Around 2009-2010, many new condominium projects started construction. By 2011- 2013, property developers averaged around 15,000 units of condos supply per year and sold them quickly. Those were the times when Russian language was seen on boards and signs everywhere on the streets… the good old days. Russian economy was doing well and they were splurging on a good life in Pattaya. They were the major foreigner property buyers and a target of developers.
In 2014, condo supply dropped slightly from 15,000 to 12,000 units per year but developers were still pumping out new projects into the market and then… the crisis hit.
The Russian Financial Crisis (2014-2017)
The worst thing about financial crisis is not the crisis itself, it’s the I-didn’t-know-it-was-coming that hurts the most because people get caught off guard. On an average, a condo project takes 2-3 years to complete. To stop a supply in 2014, developers had to hit the brake in 2012, but 2012 was still among the golden years. So, by the time The Russian Financial Crisis (2014-2017) came into realization, there were still condos under construction and the completed ones rolling out. In 2013, around 12,000 units came into the market. 15,000 units in 2014 and 10,000 units of condos were built and supplied into Pattaya property market in 2015, despite the turmoil. In 2016, condo supply dropped to 2,100 units. The whole market took the hit.
The decline of new condos in Pattaya from 12-15,000 a year to 2,100 a year reflects how drastically the market slowed down or better, how important were the Russians and how their decline in purchasing power had affects. However, Pattaya didn’t really go into a plunge. It is one of those places that has eggs in many baskets. Which is always good and, therefore, been attractive to investors ever since. Pattaya has an all-year strong tourism industry. The number of visitors in Pattaya in 2015 increased from 9,083,899 in 2014 to 9,849,940. A whopping 8.4% increase, despite the exiting Russians.
Pattaya, Phuket and Bangkok are the top 3 destination with the most number of tourists in Thailand. But if you compare the size, Bangkok and Phuket is a huge city, Pattaya is merely a town with a total land area of 22.2 square kilometer or 8.8 square mile. Tourist density is very high. And it enjoys not only international visitors but also a major number of domestic tourists which comes, mostly, from Bangkok. In 2015, Out of 9,849,940 visitors that visited Pattaya, 6,851,461 were foreigners, and 2,998,479 were Thais. That year Pattaya generated US$3.5 billion from foreign tourist and US$704 million from Thai visitor, making a total of US$4.2 billion, which was an amazing increase of 24.7% from 2014. The average accommodation occupancy rate was as high as 75.18%. All this happened in the middle of the storm when the major economy driver like Russians became broke and left Pattaya.
That’s the power of this town. There aren’t very many places in the world where both tourism and real estate opportunities are available hand in hand, that are reachable by mass market and that’s exactly why Thailand (Bangkok, Phuket and Pattaya) are among property investors’ top wishlist.
What happened to Pattaya real estate market in 2014 was a transition from the Russian to the Chinese era. Like all major changes, it didn’t happen smoothly. Oversupply plagued the market, condo prices dropped, the Russians buyers left their down payments and deposits. Currently, in 2019, Pattaya property market is still considered to be in the recovery stage.
The Rise of Chinese Capital Inflow
Chinese capital is increasingly playing major roles in the Thai property market, especially in the residential (condominium) sector. If this capital continue to increase (which causes condominium prices to dramatically increase in the areas where Chinese people buy), speculative behavior among investors and fierce activity (big supply) among developers will increase. In contrast, if this capital decreases, it may create problems for the existing condo supply causing sales cycle to be longer and may affect property investors and the liquidity of the developers. The concern becomes a lot more intense if there’s a massive increase of capital injection (which has been happening in the last few years) followed by a major and abrupt decrease (which is also happening in 2019 with RMD currency becoming weaker). This could lead to a major over supply and add up to real estate bubble (a more likely event in Bangkok rather than Pattaya)
To prevent such problems, it is necessary to understand Chinese buying behavior and stats that reflects the market conditions. So that all property buyers are accurately and timely informed. Information including new developments, sales and left over stock needs to be transparent and fairly provided to all parties, especially to condo investors, to assess the market situations correctly and make better decisions. Information on Chinese penetration in Pattaya (and Thailand) is, hence, very important and has been covered to a great extent in this article. You may find detail information on Chinese property buying consumer behavior on this page.
Chinese obsession with real estate is unquestionable. Their motivation to buy property is not only for business purpose but a cultural norm that reflects one’s reputation and social status in the society. They are also very powerful buyers. In 2018, 65% of them, that bought condos in Thailand, paid with straight cash. And the way they buy up supplies is like no other. Talk to an estate agent, and you will know that their confidence is so high and pockets so full that sometimes they sweep buy the whole floor not just a unit.
Chinese have been a decent buyer for long, but when did they become a major buyer in Pattaya? Well, it was between 2014 and 2015. Yes, they came in at just the right time during the Russian crisis. And continued to be the top buyers among all foreigners buying property in Thailand. In fact, of all the condos sold in Pattaya in 2018, 21.2% were sold to Chinese/HK buyers alone. 50% were bought by Thais and the remaining 38.8% came from USA, Singapore, Taiwan, UK, India, Japan and others. Thai property developers knows this more than anyone and have been marketing to them heavily. In fact, they played a vital role in directing Chinese capital to Thai real estate market.
Thailand got an enormous 10,535,241 Chinese tourists in 2018, and gained a reputation as the top destination to visit. But what really drives them to buy property in Thailand? Juwai Chinese property portal, surveyed a group of Chinese investors and found out that it all started from visiting Thailand as a tourist, got impressed and simply felt comfortable here. They then buy a condo and tell a friend. Property buying slowing picked up and now it’s almost a trend. Who doesn’t know that Chinese people buy properties in Thailand? With increasing popularity, the snowball simply got bigger by following the followers. peer guides, word of mouth or anything for that matter.
They love Thailand, are comfortable, have the confidence, have testimonials from other Chinese buyers, property prices are affordable and profitable. So, why not?
Thai Buyer’s Behavior and Motivation
Pattaya Property’s No.1 Buyers: The Locals
During Russian financial crisis, tourism alone didn’t play a direct role in sustaining Pattaya’s economy and property market, domestic investments from the locals absorbed whole lot of new condos that rolled out. Thai condo buyers helped Pattaya property market.
Thais buy a lot of condos in Pattaya. In fact of all the condos sold in Pattaya, 50% were bought by Thais and 50% by foreigners (Actually, that statistics reflects more on how much the foreigners buy condos in Pattaya, since only 20% of condos are bought by foreigners and 80% by Thais in Bangkok). The interesting part is, major buyers are not really the locals living in Pattaya, they are the investors and holiday home buyers from Bangkok. Pattaya offers a quick weekend escape, since it’s less than 2 hour drive from Bangkok. Such buying behavior among Thais is observed in properties in Hua Hin as well, which is another popular beach town less than 4 hours drive from Bangkok.
Thailand is a country with the most number of public holidays. Having long weekends (Friday, Saturday and Sunday or Saturday, Sunday and Monday) holidays is quite frequent. On those weekends, if you live in Bangkok, you will notice the vibrant city seem to be much calmer. They are all gone, somewhere, for a quick holiday. Pattaya is the nearest and the most convenient destination. Buying condos in Pattaya makes perfect sense because you get to use your property, get rental returns most of the year, and grow your capital. It’s easy to manage as well, since it’s nearby. Therefore, domestic tourism plays a vital role in influencing Thai people to buy condos in Pattaya. And there were as much as 6,087,873 Thai people that toured in Pattaya in 2018, that spent 3,514.03 baht per person.
Source: National Statistics Office of Thailand.
Start Reading from the beginning: Pattaya Property
Investor’s Interest in Pattaya Property: Attracting Factors
Understanding the reasons and factors that attract investors to Pattaya is important. So, that you know what information to look for when you want to assess the market situation.
Pattaya real estate benefit tremendously from Tourism. And tourists are not always wanderlusts. Investors, businessmen and woman do take holidays. And their minds are such, they can never stop observing for new opportunities. Once they see and get impressed with all that is happening, naturally, the interest of being a part of it rises.
We must understand that this is a blessing. It isn’t really practical for anyone to fly to different countries and explore, just to look out for property investment opportunities. The same rule applies for Thailand. People come here to tour, not to scout for properties but scouting happens in-process while touring. Think of tourism as a marketing funnel for real estate. A funnel that captures leads and then converts them into sales. Pattaya gets millions of tourists each year. It’s hard to believe that this 22 square kilo-meter town generates US$ 4.2 billion, and when investors realize that. It itches them.
Nightlife: Like it or not, (central) Pattaya is also known as the sin city. This sub category of tourism generates a whole different level of revenue. Night life and party places are always expensive. Tourists going to a bar, extremely excited to get drunk, will generate higher revenue per head than other kinds of tourist attractions. The circulation of cash is enormous.
Though nightlife is not a factor for buyers to buy a condo in Pattaya, it keeps Pattaya’s economy healthy, which keeps the real estate market healthy. It attracts people to move in to do business, creates jobs and hire employees. All of them rent/buy a house/condo to live in. It pushes property prices up and supplies tenants consistently. And continuously attract more tourists inducing an upward spiral of the whole chain, again and again.
2. Low Price, High Return and Guaranteed Yields.
This is common sense part. Investors invest for profit. If there is more profit there is more interest. Low prices simply mean more tickets. When the price is high, there’s a smaller market size. Imagine, how many investors can afford to invest in Monaco. Very less. So, when the price is lower, there is more players. Selling/liquidity also becomes easier. The downside to this is, it is hard to control and the market can easily be messed up, especially with oversupply because more demand brings more supply. When the suppliers becomes over confident and pump out too much condo, the price drops. Everyone is effected.
The average condo price in Pattaya is as low as US$2,633/sq.m. Average gross ROI at 5.8%, I have already covered the pricing and returns earlier in the article. Refer to Understanding Pattaya Location section
With so many condos comparably cheaper, gives good ROI topped by a guarantee, investors get confused, not whether to buy or not but with the question why is the whole world not buying guaranteed ROI condos in Pattaya? It’s so obvious that properties in Pattaya provide one of the best opportunities. Well, that is not really the case. Guaranteed ROI or Guaranteed Yield is one of the hardest schemes to understand. And if one doesn’t really understand the math behind what is actually happening, he/she can easily get into a loss without even realizing it. Some people were even shocked to learn what they have already done. Here, I have written an extensive article decoding guaranteed return on investment.
3. Social Approval:
One underestimated and hidden power that’s driving demand is social influence. We are all humans and 95% of our decisions are irrational. Which also includes bigger decisions like investment. The bottom line is, we get sub-consciously influence by so many factors we don’t even realize, since it’s happening sub consciously. And one of the most influential factor is our social network.
Buying a property in a foreign country is not an easy task. We must understand that most of the buyers are not professional investors. They are from different professional backgrounds. But they have the money to invest which involves a lot of risks due to ignorance. But when one talks and sees other people, especially from their own country, doing it, one feels safer. It’s something similar to seeing 5 star reviews of a product on Amazon. It develops your confidence in that product. You are then more comfortable in buying it because our brain thinks if everyone is doing, then they must be doing right. It’s a ‘Follow the Followers.’ mentality. This is all about human psychology and nothing much about Pattaya real estate. People gain the confidence and are more comfortable in buying, which attracts other followers. This is especially true in the Chinese buying behavior.
4. Property Developer’s Mega Marketing Campaign:
There’s a saying,”it’s not how good your product is, it’s how much people know your product exist that drives sales.” If you utter the word Sansiri, Chinese people will raise their thumbs up, thanks to Sansiri’s effort in extensive marketing campaigns in China. Singapore is another country that developers have been penetrating. You will see showrooms and show units, in Singapore showcasing their projects. This shows how seriously and fiercely, the developers are competing to reach out to potential foreign buyers. Singaporeans are the 3rd and 2nd biggest condo buyers in Thailand and Pattaya, respectively (as of 2018).
5. Political Stability & Safety
Though Thailand is infamous for its politics, it usually come and go in short cycles. And the impact is usually temporary. There is no such thing as prolonged violence or war that knocks the economy off its perch. Nevertheless, it is still one major concern that investors should worry about. Fortunately, riots and shutdowns doesn’t happen in Pattaya, its more in the city centre of Bangkok. Apart from that, Pattaya is one of the most trouble-free destinations (if you don’t mess with the locals).
6. Location, Location, Location
Pattaya is a beach town which is always attractive by nature. However, the nature that it offers is not the most beautiful but it’s one of the easiest to access to. That’s a good location. As described earlier above. Pattaya is considered to be the capital of East Thailand. It’s near Thailand’s main international airport, near Bangkok, near a major industrial hub in Chonburi and at the centre of the happening EEC (that we will talk about in a moment). It, in itself, is a tourist hub that makes it one of the best locations for property investments.
7. High Labor Demand.
Labors that come from abroad, they come to earn and not to buy a home. But everyone needs a place to live. Hence, foreign labors need to rent… Bingo! Property investors are looking for just this group of people. As of 2018, there were 10,870 foreign labors in Chonburi, which accounts to 7% of the population, more than that of other popular destinations in Thailand like Phuket and Chiangmai. Most of these workers are engineers, lawyers, admins, managers and high level management teams from countries like Japan, China, India, Taiwan, Korea, the Phillipines, France, England, U.S.A, and Malaysia in a descending order.
These factors attract investors and bring property developers back to life.
Start Reading from the beginning: Pattaya Property
Understanding Chinese Capital
Chinese Capital Control | Affects on Thai Real Estate
This is a separate topic on its own and I have written about it on a different page here. Chinese Capital Control
Statistics: Condos Sold, Unsold and Leftovers
In 2017, 2,192 units of condos were built. In 2018, an astounding 10,239 new units were put in the market. 8,047 units more than the previous year! That is, indeed, a very big number. Who is going to buy so many units? Over the years many condo projects were built and a lot are still left over for sale in the market. More than 79,238 units were built between 2011 to 2018, and approximately 12,000 of them still remain in the stock in 2018 which rose to 16,000 units in 2019. With an additional of 10,239 units (and more in the pipeline), it’s intriguing on how will they sell all these units. Buyers, today, are far better equipped with information, facts, and understanding of the market more than ever before. Developers simply need be cautious with new launches.
The average absorption or buy up rate in Pattaya has been at 80%. Which is a good number but investors should not be carried away by this figure, since this figure reflects the past and nothing about the future. In 2019, so far, the absorption rate has been at 72%. How else will these condos be absorbed? We need to understand factors, situations, market and things that effect sales.
Pattaya is a market for investors more than home buyers. Which means people who buy to live is less than the people who buy for investment. As an investor, apart from the rental return, everyone wants some capital gain. But if the supply becomes excessive, oversupply market is likely to happen. Not to mention the devil inflation that will catchup, regardless of anything. Knowing this, we recommend to make extensive research before getting into any deal. Especially the locations and type of condo to buy that has highest potential of good returns and re-sale value.
This leaves behind a big question, why are so many condos being built despite the recent slump? What’s in the minds of the CEOs of these companies?
Before we dive deep into the reasons, I’d like to point out a difference in the characteristics of the current market (after 2017) and before 2014, and Bangkok property market as well.
Pattaya condos (before 2014) is different from what it is now (after 2017) and from Bangkok. Condos developed by big developers account for only less than 20% of the total condos before 2014. The other 80% were built by smaller developers that are not very well known. While in Bangkok, most of the projects are developed by established branded developers, you can’t deny that condo branding play a vital role in buyer’s confidence. Branding is important for both new and re-sale condos, especially in the Thai market.
This time (after 2017), we see more of bigger developers coming into Pattaya, this will surely bring their fan base and raise some confidence in the market. You might be thinking why didn’t the big developers came in, in the first place, and how come did the small-mid size developers became the majors builders in Pattaya? Well, condo market in Bangkok had been much hotter than that of Pattaya in the past decade. This kept the big developers busy in Bangkok, leaving opportunities for smaller developers to play a role in Pattaya market.
This was also one of the reasons for scams and mishaps in Pattaya, that many of you might have heard of. When the crisis hit, many (especially the Russians) condo investors/buyers couldn’t afford to continue their buy so they dumped their deposits/down payments and left. Some of the developers couldn’t absorb this blow. And with no brand image to lose, they too cut their losses and left, and hence, people were scammed. People know and remember this. Therefore, branded developers will play a vital role in resurrecting this damped confidence.
Coming back to the question I left unanswered. Why are so many condos being built in Pattaya? What is creating this demand?
Click Next to Read: The 4 Major Forces Creating Demand.
Start Reading from the beginning: Pattaya Property
The 4 major forces creating demands.
- Chinese super buyers
- Affordable Price, High Gross ROI & Guaranteed Yield
- The EEC Hype – Government & Foreign Investments
- The Market is Crashing (Upside)
However, we made sure we identify the downside to this as well. And, as expected, there are worrisome factors for the investors to consider.
The 6 Major Precautions and Pitfalls (at the end of this page I linked to it)
Let’s start with the postive reasons to invest first, so that I can bring you back to reality with the negative reasons later and keep you cautious if you’re really considering to buy something.
1. Chinese Super Buyers
China is home to 1.43 billion people. You will always hear this number about their population and the massive buying power. I really wanted to know how many of them are actually buying properties in Thailand. Finally, is it really worth paying so much attention to them, also are the developers building so much because there is indeed a very big amount of buyers? Just how many of them are there?
So, I did some research to figure out who exactly they are, where are they, how many of them are there and why do they buy property in Thailand. We conducted an extensive study and found some interesting information.
Who are they?
Millennials: It turned out that majority of the Chinese, buying in Thailand, are Millennials. Though, Millennials are categorized to be people born between 1980 – 2000, which translates to 25 – 45 years old. But not all Millennials buy, the actual buyers fall into age demography between 25 – 35 years old (as of 2020). If you think about it, it makes sense because this is the age group that becomes less reluctant from buying a home. This is the age where people will be thinking of their future more seriously. Marriages, raising families, financial security, investments, etc. Home buying or property investment is definitely something Millennials are constantly thinking of or even worried about. This trend is rather a natural phenomena than any special thing happening to Chinese only.
There are 350 million Millennials in China, that’s approximately 25% of the population. And guess, who has been the powerhouse driving China’s massive GDP growth for decades? It’s them. They are the ones that are rich and getting richer. Chinese are some of the wealthiest people on the planet. Though on the GDP per capita map they are not because are there still millions living a poorer life, but the sheer size of wealthy population are way too high to ignore.
If you look at the age demographic of Chinese buyers, Chinese tourists in Thailand and the theory that Chinese tourists gets converted into buyers, you will see a some information that makes sense to say that Tourism is influence real estate market.
See Stacked Column below. Majority of the visitors are Millennials, and a bigger percentage is the people age between 24-35 years old. But as I found out, there is more to that.
Upper-Middle Class Market: In 2020, there’ll be 3.88 million high net worth, 280 million affluent and 100 million upper middle-class Chinese (with average $46,000 in annual disposable income). Forget about the affluents and high net worths, these people can buy anything they want but it is the upper-middle class segment that is interesting. These people would be more attracted to the more affordable property in Thailand than other high price investments. Their average income is US$46,000 per year. Too less to buy properties in other top destinations but perfect for Thailand, especially Pattaya. Look at the sheer size of them. 100 million people with US$46,000 annual income. That’s enormous. This segment has been partially locked away from making property investments (in the top 5 destinations that Chinese buy the most) because they can’t afford it. Thailand’s real estate unlocks and unleashes a whole new market. The good news for property sellers and real estate agents is… you have not missed the train. This is only the beginning, a lot more Chinese will buy Thai condos or at least that’s what the trend shows (if they manage to escape China’s Capital Control, which we will talk about later). Below is the stats of money that was transferred into Thai from China/HK, solely for buying condos.
That’s one major reason why Thai real estate is high up on the list competing with property markets like Vancouver, Sydney and London. With a cheaper price tag, the advantage is not just the price but the entry level is lowered. Thailand has many luxury condos with starting price around US$8,000+/sq.m, but that budget would target a similar market segment (in terms of budget) that are buying in America, Canada, and other expensive countries, which is something that buyers with lower budget than US$ 6,000/sq.m can’t enter. But in Pattaya, they easily can
How many of them are there?
Not very many. This is where the truth sinks in. As much as the hype has been around about China’s GDP, population, and powerful foreign property buyer, the number of real buyers is a tiny percentage.
Firstly, only 9% of the Chinese population has a passport.
Next, in 2018, which is the best year so far, only 2,000 – 2,500 Chinese actually bought a condo in Pattaya. By making approximation and educative guess, around 20,000-25,000 of them consider to buy and may have requested for 200,000 – 250,000 property tours and viewings, which is a big number and it’s where the excitement comes,
Just an interesting fact: The number of Chinese buyers who bought condo in Pattaya accounts 0.0006% of the Chinese Millennials (that has been vaguely identified to be the targeted segment). This is very interesting because a minute increase in this percentage can bring enormous effects.
only 9% of the Chinese population has a passport.
Buying Motivation. Why Are They Buying?
Buy To Live
The good news about their purpose of buying is they buy to live as well. 51.8% of all the condos bought by Chinese are for investments. The remaining 48.2% are bought with the purpose of personal use. A lot of Chinese companies and entrepreneurs are moving into Thailand, and renting is not a popular option. They buy for personal use, with a eye on the long term benefit. Which is a perfect condition for any real estate industry’s sustainable growth. (Please note that this figure is for the whole of Thailand and not just for property in Pattaya. Unfortunately, we don’t have the stats for individual purpose of buy by city).
Among all condo investments, guaranteed yield became the most popular attraction among Chinese property investors. It serves their purpose.
China’s Capital Control leaves a breathing space for Pattaya property market. We stumbled upon some intriguing information and were trying to figure out the logic behind it.
In 2016, the Chinese government made it clear that they do not want money to flow out of China. Period. And they were aggressive about it. They restricted only US$50,000 outflow cash from China per person per year. So, each person can exchange a maximum of US$50,000 per year. That’s very less! US$50k will buy you peanuts not property. This triggered a chain of events and real estate markets like Vancouver, and other top destinations in the U.S. took a major hit. However, It didn’t hit Pattaya as much as it did to others.
US$50,000 per person equates to US$150,000 per family (a family of 3 members). Let’s have a look at what property can a Chinese family buy in a year with that budget. Chart below shows the average condo price per square meter in the top destinations where most of the buying occurs compared to Pattaya condo.
2. Affordable Price, High Gross ROI & Guaranteed Yield
Condos in Pattaya are much more affordable while providing satisfactory yield. Other popular property buying destinations like the U.S., Canada, UK, Hong Kong, Australia, etc. are a lot more expensive.
The average price per sq.m in Pattaya is US$2,633 / sq.m. Of course, there are some luxury condos that sells north of $5,000 / sq.m as well. Now, lets see what can a budget of $150k buy. Note that the price is an average of both new and re-sale condos available in the market.
With US$150k budget, buying a 10+ sq.m in Hong Kong, London, and Beijing is almost out of the question. There is simply no place to store your shoes. But as you can see, below, for the same budget you can easily get an average of 57 sq.m condo in Pattaya.
Now, let’s say the smallest livable unit size is 25 sq.m. The figure below shows how many condos can a US$150k cheque buy in each city.
In Pattaya, you get up to 2 units. And what if you’re interested in a 2-bedroom condo? Pattaya is your only option. Though the above information was focused on Chinese buyer’s market, the same reasoning applies to everybody. Lower entry level pricing will always attract more buyers and open up a new market segment, which also helps in re-sale market in case you want to sell your condo.
High Gross ROI:
Again, I briefly touched on this topic above in the article, I have covered lots more detail later in this article. Property investment is complex. Before shelling out cash, one must understand, know and be able to vision:
- economic growth
- consumer target
- property market stability
- capital gain potential
- personal finance
- location analysis
- more and finally… ROI.
Everything should balance perfectly. So, let’s talk about ROI or Return `on Investment in buying a property in Pattaya.
Pattaya has had a consistent ROI at 5+%. There are many information out there on the internet that claim the ROI to be as hight as 9-10%. Those figures simply don’t exist. Though there are always exceptional cases, the average definitely does not. It’s simple common sense, if condos in Pattaya have an average ROI of 10%, there won’t be 16,000 units left unsold in the market. In 2017, developers won’t just build 2,000+ units. People would be flocking pay double the price and still yield 5%. Saying that, 5-6% gross ROI is a fair number to expect, but again, that is gross ROI not nett ROI.
Nevertheless, it’s still one of the highest rewarding market you can find in the world of real estate. There is more famous property investment plan that gives high ROI. It’s called Guaranteed ROI or Guaranteed Yield.
Guaranteed ROI have been one of the most successful campaigns that convinced many investors to invest in condos. In fact, some investors invest only in Guaranteed Yield projects, even if they had to pay a little higher than the normal condo price tags. Many projects with guaranteed ROI sold very well.
But what exactly is it? It is a special campaign where property developers provides a guarantee return on investment of certain % for a certain period of time to the buyer. For example, if you buy a condo worth US$100,000, with a 5% guarantee return for 3 years. (5% of US$100k is US$5k per year or US$ 417/month). You will get paid this amount from the developer for three years, even if your condo doesn’t rent out. Your income is guaranteed. Some developers give long guarantee periods as much as 6-7 years. This makes investments extremely attractive. Putting that money in the bank would simply get eaten up by inflation. so it’s far better to put it in such investments. Investors know this and they don’t have to worry about all the investment complexities I mentioned earlier.
Honestly, I don’t buy into Guaranteed ROI. I’m skeptic about it so I investigated into many projects (that I won’t be naming) and discovered some clever things that they might don’t want you to know. Some are really innovative from the developer’s part and deserves a thumbs up while some are just to fool the buyers.
If you are looking to invest in Guaranteed Yield Projects, you must understand what it is. Imagine Tom, Harry and Peter selling donuts.
Tom is hardworking. He sells donuts at $0.99 each from 9-5pm everyday. One day, he didn’t sell well, so at 4pm he puts a sign “20% discount. Donut @ only $0.79/piece”. People flocked to Tom’s shop and he quickly sold out. Thankfully, he didn’t face the loss of throwing donuts away had it not been sold.
Harry, saw this and came up with a smart plan. He priced his donuts at $1.39 each and put a sign “20% discount, $1.10/donut”. Despite higher selling price than the full price that Tom sells, people still rush to buy donuts from Harry. That’s because Harry understands that people are more attracted to the deal rather than the product. Some people know that the actual price of donut is $0.99. Those people don’t buy from Harry. But Harry does’t care because his target is the people who don’t know the price. Harry makes much more sale and higher profit margin than Tom.
Peter is creative and innovative. He cares for his customer’s budget and thinks if he can sell donuts faster, then he can reduce fixed costs like rent half day or hire employee half day and sell cheaper donuts to his customers. So, Peter sells donuts at “20% discount, $0.79/donut” from 9am to 12pm only. He sells faster, makes a bit lower profit than Tom and Harry, but saves 50% of rent, employees salaries and marketing budget. He saves time and cost. And eventually makes good profit and grows a sustainable business. Peter’s customers love him and always make sure to be at his shop before 12.
Who would you like to buy donuts from? Tom, Harry or Peter. I guess you wouldn’t buy from Harry for sure. And you’d only go to Tom if you come later than 12 pm to Peter’s shop, right? The same concept is happening in the Guaranteed Yield Condo investments plans. It’s just that understanding the math, economy, property prices, and some human psychology all in one is a difficult subject to the general people. It is much more complicated and confusing than donuts. And hence, many investors have been buying condos from Harry.
I have shown an in-depth explanation on how to see if you really benefit from such schemes, what must you look into, and how to calculate whether you are actually benefitting in case you want to invest in any such property. And how to identify which developer is Tom, Harry, or Peter.
Overall, Pattaya condos remain high on investor’s wishlist, both Thai and foreigners.
Disclaimer: We do not think Guaranteed Yield Investment plan is any kind of a scam by any means. It’s pure math, which we believe most of the buyers don’t think that deep. And we want to shed light on it for buyer’s benefit.
3. The EEC Hype – Government & Foreign Investments
EEC (The Eastern Economic Corridor) became one of the hottest topics of discussion after the election in 2019. Investors aiming to invest in property have been keeping a close on it to see how things would evolve.
Various measures to encourage foreign investments like developing public utilities, high speed trains, development of Thailand’s 3rd main airport – Utapao International airport, Mabtaput and Lamchabang port, new highways logistics, human resources, and One-Stop Service Center to facilitate investors have been taken. A special measure is also under consideration that will allow foreign investors to own land and property in the EEC region.
This has sparked the hopes among real estate companies and investors because of mega foreign investments that will come in will create another economic hub of opportunities for investments.
The measure to allow foreigners to own 100% of the land and property in the 3 provinces is no doubt the hottest topic. Many Thais are concern that foreigners may conquer the whole region. Though this will lead to attracting major foreign investments, including bringing personnel which will increase demand for housing influencing higher sales and promote domestic housing market, the real benefit may not fall onto Thai people because foreigners may invest, build and sell among themselves, which is exactly what happen in 2019 where 82% of all the new condo projects launched in Pattaya were foreigners and only 18% by Thai developers.
Imagine Thai people paying tax to the government, which is used in investing in this project and then the foreigners come in to reap the benefits. That would feel no less than a stab in the back for Thai people. This is why many people are against this measure. In the previous decades, situations were different. Foreign investments created jobs for the locals. But in this era, companies would definitely focus on using robots and AI automations rather than human work force. It’s quite sensible to wonder if Thai people will benefit on their government’s massive investment.
Regardless, EEC will have big impact on the residential sector and Pattaya will benefit tremendously like never before from tourism and labor migration. For such a massive project, tons of businessmen, engineers, lawyers and people from all professions will pour in. And all of them need a place to live. Hotels and residential property will be in demand.
Pattaya property market, especially condominiums, is arguably stronger than all other tourist destinations in Thailand. It is, only, second to Bangkok. And if you compare their sizes, Bangkok has land area of 606 square miles while Pattaya is just 8.6 square miles. In that area, Bangkok host around 1 million units of condos, while Pattaya has approximately 100,000 units. This means that Pattaya is 1.5% the size of Bangkok but have 10% of condos of what Bangkok have. Isn’t that something to talk about?
Pattaya’s mixed economic system makes the real estate market more reliable and stable in comparison to various other cities in Thailand. Pattaya get more than 10 million visitors every year compared to its population of only 400,000-500,000 people. It relies on both foreign and Thai investors, tourism, strategic location and now the EEC.
Like mentioned earlier, half of the condos in Pattaya are bought by foreigners and the remaining half by Thais. Unlike Bangkok, where 80% of condos are bought by Thais and 20% by foreigners. This makes Bangkok property market more vulnerable, by relying heavily on Thais and Thailand’s economy, which is exactly what’s happening in 2019. The new LTV measures have cut down Thai buyers’ ability to buy and the market slowed down immediately.
Pattaya’s market is reliable for domination and expansion for both international and local investors. Chinese investors have entered the market in the past recent years at a very large scale which creates revenue growth and profitability for the region. Pattaya will continue to be the vital focus of the Chinese. In recent years, more Indians have joined in. Pattaya became one of the must go to destinations for Indian tourists. This has seen overflowing of Indian restaurants and nightlife entertainment targeting Indian tourists. Though they are yet to be converted into property investors, it is a new market opportunity. After all, that’s how the Chinese penetrated Thai real estate market. They were tourists that converted in to property investors.
If EEC can impact larger cities like Chon Buri, Rayong, Chachoengsao, Pattaya is just a small town that will inevitably benefit by this gigantic wave of growth. EEC will attract more investors, population migration, tourists and businesses. Perhaps, this is what’s running in the developer companies CEO’s minds. That’s why they are continuously building more condos despite big number of unsold units available in Pattaya. May be they are thinking a couples of years ahead of time.
This is not a prediction in anyway, it’s just an educative guess. Nevertheless, developers are much more careful now and supply is expected to slow down in 2021 based on lesser building construction permission application in 2019.
Understand EEC in depth. Read EEC
Start reading this article from the beginning: Pattaya Property