Chiang Mai’s real estate sector is booming, offering solid prospects for savvy investors
By Sooruj Gupta
Chiang Mai is usually associated with rolling hills, elephant safaris and tourists clicking away at the region’s scenic beauty. However, the city itself is currently going through its second real estate growth cycle.
For decades, Chiang Mai’s economy has been growing on the back of its status as a hub for tourism, culture and education, with a student population of more than 100,000.
The city’s close proximity to Myanmar and China has also aided its economic fortunes. Plans for direct highway and high-speed rail connections linking Myanmar to Chiang Mai have highlighted this. Furthermore, work has begun on a high-speed rail network that will link Chiang Mai and Bangkok directly, with real estate developers planning projects that are situated along its path.
Prime Minister Yingluck Shinawatra has ambitious plans for the continued growth of Chiang Mai’s economy. This drive can be largely attributed to the fact that her Pheu Thai party enjoys great support in these northern areas.
In the past couple of years, construction approvals, as well as the demand for properties, have skyrocketed in Chiang Mai. Thanks to raw land costs that are low compared to Bangkok and coastal areas, a number of prominent Thai developers, such as boutique experts Lucky Living and the multinational Sansiri, have increased their land holdings or announced project plans.
The first six months of this year saw more residential units come onto the market than in the previous 17 months combined, but this sudden wave of supply has not dampened prices. Instead, the units that came online have sold for 11-12% more than the market price a year before.
According to Thai government figures, there is a total of 18,640 units in Chiang Mai. More than 6,000 of them have been launched in the past six months. The market’s ability to absorb this increase in supply while at the same time seeing prices rise is a very positive sign for real estate investors.
The market’s strength can also be seen in the take-up rate, which was an impressive 72% for the first six months of this year. Even more impressive is the average for all of Chiang Mai – new units located closer to the centre of the city have achieved even higher take-up rates.
This reinforces the belief that the market is being driven by Thai nationals, rather than foreigners – a key point, as it ensures that demand and prices will move in a stable way, rather than the fluctuating and erratic way prices would move in a market that is dependent on foreign demand.
Due to the availability of quality land parcels in and around Chiang Mai, many developers have chosen to develop villa communities rather than condominiums, especially since Thai consumers prefer landed property with a garden of some description, according to research from the real estate consultancy CBRE.
There is a total of 740 units coming online by the end of the year in the inner-city area, and a further 1,180 in the outer city. As an investor, it is crucial to look at the number of units in the development and then factor in your investment.
For example, if there were 400 units in a development, it would be very difficult at the point of sale to extract or portray any special value in your property against the 399 other properties in the development.
Chiang Mai’s inner-city area has a total of 17 developments in the works, with an average of 128 units per development. These figures show that developers are not flooding the market by any stretch. Inner-city areas worth keeping an eye on are the neighbourhoods of Nimmanhemin, Charoen Prathet and Chang Khlan – all of them close to the centre of old Chiang Mai and leading the market in terms of price appreciation and construction activity.
Sooruj Gupta is a director of Chelsea Realty, a real estate consultancy that specialises in Asian property services and has operations in Indonesia, Malaysia, Thailand and the UK.