Is Real Estate in Bangkok cheap?
There is still a lot of interest in the Bangkok property market by international investors, who still feel that real estate in Bangkok is cheap when compared to other Asian cities of a similar size.
Are these people making the right comparisons? There are a number of differences between Bangkok and other more expensive cities in Asia. Take Hong Kong or Singapore (probably the 2 main cities that the people in the group above are comparing with). Firstly, both Hong Kong and Singapore have obvious land constraints. The whole country of Singapore is about the size of Bangkok and they literally canít keep building because they donít have the land, unless they find a way to build on water! Bangkok on the other hand does have the land. The south of Bangkok is sea-locked but east, west and north are all there and open for the taking. The north of Bangkok is already quite developed, no doubt this being partially a result of the old international airport at Don Muang, but heading out east and west of the city you will quickly come across large open green areas waiting to be developed upon.
Secondly, the average salary per capita is higher in Singapore and Hong Kong than Bangkok. People in Hong Kong earn more. Everything is determined by supply and demand and if you get paid more in Hong Kong wouldnít you be willing to spend more there? Would people ever be willing to pay the same price for real estate in Bangkok as Hong Kong if salaries were 5 times more in Hong Kong? Is this situation likely to change? On a similar note, I would imagine that it is easier to employ cheaper labour in Bangkok and therefore cheaper to build in the first place.
Letís look at some figures for 2006. The average price per square metre of a 120 sq.m. apartment in Hong Kong was approximately US$12,599 compared to US$11,800 in Singapore and US$2,819 in Thailand. Taking Hong Kong as the example, apartment prices were 4.47 times higher in Hong Kong than Thailand.
Now letís compare GDP per Capita for the same period. In Hong Kong the GDP per Capita was approximately US$ 26,824 per person, compared to US$30,161 in Singapore and US$2,959 in Thailand. In this case, GDP per person is over 9 times more in Hong Kong than Thailand.
Is Bangkok a more desirable place to live in? This really depends on your own point of view. Some people might give more weighting to cheap Macdonalds, restaurants, taxis and an attraction to the opposite sex. Others might give more weighting to tidy litter free streets, pavements you can walk on, less traffic pollution and no street dogs. This is inconclusive.
We could turn to the surveys. According to the UN Human Development Report of 2006, who based their findings on life expectancy, literacy, education, and standard of living, this being a standard means of measuring well-being, Hong Kong came in at number 22 (with a total Ďscoreí of 0.927), Singapore came in at number 25 (with 0.916), and Thailand came in at number 74 (with 0.784) just in front of Samoa and Saudi Arabia.
Of course, this is taking the population and country as a whole. If we take the two parameters of literacy and education, then there are a number of good quality international schools in Thailand and if you factored into the equation the cost of private schooling and general cost of living in Thailand, you may still find it more cost advantageous to live in Thailand.
In any event, I rarely hear people comparing the price of real estate in Bangkok with that in Manila, Hanoi, Ho Chi Minh or Jakarta. Is there really that much difference? Is Bangkok really that much more similar to Hong Kong and Singapore, are we comparing wines of the same vintage or is the price of real estate in Bangkok as it should be?
Neil Simmons is a director of Ideal Homes Real Estate Co. Ltd. He can be reached at (02) 714 3832-3