Mr. Carlos Martinez, Director of Research and Consultancy, Knight Frank Thailand said,“Different studies conclude that the recovery of tourism spending to pre-Covid levels will take between two and three years. In any case, this is uncertain as it relies on the pandemic development, not only locally, but at a global level.”
The Thai border has been shut to mass tourism since late March 2020, leaving a devastating effect primarily on the hospitality industry in Thailand, but also on the condominium market with a strong reliance on foreign buyers such as in Pattaya.
Pattaya reflects the third largest tourist destination in Thailand, after Bangkok and Phuket. The number of foreign and local visitors as well as the number of foreign condominium buyers has been increasing. In recent years, it has been a popular destination in the travel itineraries of an increasing number of Chinese visitors, who now represent the main foreign buyers. Other foreign buyers include Singaporeans, Russians and Europeans. Chinese buyers mostly acquire units for investment purposes, while Russians and Europeans mainly focus on purchasing retirement or vacation homes.
Foreign condominium buyers in Pattaya represent between 20 to 30 percent of the total demand. In some projects, this figure exceeds 49 percent, which is the maximum permitted by the Condominium Act no. 4. When surpassing this quota, foreign buyers can acquire the unit under leasehold tenure only.
Additionally, the pandemic is not only affecting the tourism industry but most sectors, such as transport, retail, manufacturing and even agriculture, weakening national income and employment, and ultimately private consumption. This will harm local demand for property in Pattaya, especially due to its character as a second home market for Bangkokians.
“In the past ten years, the average level of annual demand has ranged between 7,000 and 8,000 units sold, while the average yearly supply has dropped from an average of 9,000 to 5,800 units a year during the past five years, contributing to the decrease of the backlog of the condominium supply to circa 16,000 unsold units as of the first half of 2020.
The average asking price of condominium projects in Pattaya was just over 100,000 baht per square metre in the first half of 2020, representing a compound annual growth rate of just over 7 percent during the past ten years. Average asking condominium prices can be as low as 60,000 baht per square metre for low rise condominiums far away from the coast, and as high as 200,000 baht per square metre for high-rise luxury beachfront condominiums.
The sea view and proximity to the beach are the most important factors that influence the unit value. Within the same project, the price of sea view units might be 15 to 20 percent higher than non-sea view units.
Central Pattaya has traditionally been the preferred location for hotel and retail developments, while the residential development first spread along the Wongamat (to the north) and Pratumnak (to the south) areas, and later expanded further south to Jomtien, which currently comprises the majority of the condominium supply in the market (42 percent). It is expected to continue to grow as developable land in more traditional residential areas become limited, and consequently, more expensive.
In general, Wongamat marks the most exclusive and expensive area, partly due to the lack of developable beachfront land, and partly because it is possible to build right up to the beach, as opposed to most of Pattaya where the beach is on the opposite side of the road.”
Mr. Martinez concluded, “Even though we expect a market slowdown in 2020-2021, with new supply being postponed or cancelled as the demand weakens due to the pandemic, in the long term, the condominium market in Pattaya is promising as it is strategically located in the Eastern Economic Corridor (EEC). The U-Tapao Airport, just over 40 kilometres away from Pattaya, is expected to become Bangkok’s third airport, which will be connected by a high-speed rail line to Bangkok, through Pattaya. These projects will boost the number of foreign and local visitors to Pattaya, thus increasing the number of potential condominium buyers, driving the condo prices upward.”