Thai Property Bubble Dismissed
The Bank of Thailand has played down concerns over the country’s record foreign direct investment fuelling a property bubble.
“Many foreign investors still choose to invest in the stock market while some choose to invest in bonds,” Bank of Thailand’s domestic economy department director Methee Supapong said on Monday according to the Bangkok Post.
The amount of foreign investment in the country’s real estate remains small, due to strict foreign ownership laws in Thailand that largely forbid foreigners from freeholds and restricts leases to 30 year periods. Investors have long called for these restrictions to be eased, but, Thailand, in contrast to some of its larger neighbours, Singapore and Hong Kong, has not become a speculators market. Bangkok property prices rose over 4 per cent over the last year, but Thailand has enjoyed relatively stable market prices since its recovery from the 1997 crash.
The Bank’s comments come several days after Supavud Saicheua, managing director and head of research of investment brokerage Phatra Securities warned Thailand’s property and stock markets run a risk of facing a bubble burst if foreign capital continues flowing into Asia.
With further liquidity expected in the market, partly due to US Federal Reserve measures, some Asian economies are expected to grow 7.7 per cent on average this year. Anticipating this drive for investment and in an attempt to slow the Baht’s meteoric rise the Thai Government has recently introduced capital inflow taxes that have deflected some investment.
However, with market forces exceeding the government’s own, inflationary pressure is still strong in the region, heightened further by the US dollar’s expected weakening against the Baht with the injection of USD 600 billion by the Federal Reserve.