On 26 May, General Prayuth Chan-ocha, announced that he has been formally appointed to run Thailand under the new National Peace-and-Order-Maintaining Council (NPOMC) and the army took over the reins of power “to preserve law and order”. The disruptions to the government did slow growth from a real GDP growth rate of 6.5% in 2012 but it has had little impact on Bangkok’s real estate market.
Despite initial concerns, the impact of the military coup on the real estate sector in Bangkok remains minimal as the coup came as no surprise to property investors in Bangkok. Most of the players involved in Thailand’s property market appeared immune from the current political situation. Experience has proved yet again that these disruptions are short-lived and have therefore had limited impact on the real estate sector.
The condominium index increased modestly by just under 4 per cent and the price index for townhouses rose by over 6 per cent at the end of the first quarter this year, while the residential land price index surged by over 7 per cent. Property demand has been mounting and the value of land and building transactions surged by 16.5% last year according to the land ministry.
In the past, economic crises have had far more impact on the real estate sector, such as during the Asian Financial Crisis in the late 1990s and the Global Financial Crisis almost a decade later, where capital and rental values in certain property sectors dropped. However, this time around, over the past seven months of the PDRC’s anti-government protests, capital and rental values in the Bangkok property sector continue to grow.
For some, the coup might have scared off property investors who are unfamiliar with Thailand’s political disputes and the military’s latest intervention found new investors were less willing to enter the Thai market. However, although property developers, owners, investors and occupiers have become more cautious since the protests began late last year with some adopting a wait-and-see approach, the coup has not unduly affected capital values in the market.
It remains to be seen whether this changes but many local media outlets have portrayed the soldiers as “heroes”, pitting them against politicians and policemen who had fattened their wallets with kickbacks. General Prayuth said he had no choice but to intervene, amid growing violence between rival factions after months of protests against the government. Some view the coup as an economic stabiliser.
Having said that, it remains too early to tell if the military intervention will provide a permanent solution to the country’s political deadlock and reduce uncertainty, or whether it will have a negative or positive impact on the overall economy. The Bangkok real estate market looks to be holding up for now.