Property Developments in Chiang Mai

Last edited: February 15, 2022 at 07:35:08

Past, present and possible futures

I. Chiang Mai’s Big Bang: how did we get here?

Property in Chiang Mai is hot and booming. Just drive around and you’ll be amazed about the number of construction projects planned and being built now. Housing projects (‘muu baan’), condominiums, shopping malls, hospitals and apartment buildings, there are construction projects and billboards everywhere.

A lot of projects were already planned a few years ago, but the Big Bang for Chiang Mai came two years ago when Bangkok was flooded for weeks and months. Suddenly, Bangkokians realised that Bangkok is not forever, and since then several reports emerged about Bangkok’s vulnerable position: Bangkok is sinking a few centimeters every year (!) while the sea level is rising. Combine that with poor urban planning and even poorer water management planning, and even a child can tell that the next disaster in Bangkok is just a matter of time.

Chiang Mai has benefited a lot from the flow of money from the capital into other areas. Not only private individuals started to buy up land and property, but also big companies, included stock-listed developers announced major projects. Pieces of land, previously left fallow and for sale for a long time, were suddenly bought up by Bangkok investors. The land office officially raised the government values for land and property by some 10-20%1. Land prices in certain areas even doubled in a short time.

I kept count of the number of new condominium projects a few years ago before the flooding, but I lost count after the flooding because the current number probably exceeds 40 (!). In a recent research paper, Colliers International Thailand suggests that the number of new condominium units2 added to the market has been exploding since 2011 and is at its 17 year high. In the past 2 years, more than 6,000 units were launched, while the current total in Chiang Mai stands at some 18,640 units. This implies that about a third of the total supply in condominium units was launched during the past 2 years (!).3

Colliers also suggests that part of Chiang Mai's current real estate growth is due to major infrastructural projects that were announced by the government for Chiang Mai and the neighbouring provinces, such as: a high-speed train from Bangkok to Chiang Mai, a second airport, a motorway from Chiang Mai to Chiang Rai, and a fourth ring road.

I find this highly questionable, because none of these projects has found solid ground and obviously developers know that too, although they use it as a selling point to their customers.

Disappointingly, Colliers doesn't mention the effect of the flooding in its report at all, which I believe is at the core of the current boom.

Interestingly, Chiang Rai has benefited far less from this investment boom: there are hardly any condominium projects, unlike in Chiang Mai where you see billboards everywhere. Perhaps it’s just too far away from the capital and it doesn’t have the same potential as Chiang Mai: to become a regional hub, or even more.

Prices of new condominium units are generally in the range from THB 50,000/sq m up with some peaks up in the THB 170,000 range (!), and several new condominium projects were ‘officially’ sold out within the first few days.

In the meantime, many new shopping malls are being added to the Chiang Mai skyline and two main private hospital groups from Bangkok are in the process of constructing a branch in Chiang Mai.

In short, Chiang Mai has arrived in a phase of booming real estate, which rivals the period of growth during the years 1987-1995 before the financial crisis of 1997.

II. Possible Futures of Chiang Mai

Given the current real estate boom and other factors in the (world) market, what are possible future scenarios for Chiang Mai?

Underneath, I stereotype three scenarios to highlight the different underlying factors:

A. Chiang Mai becomes a major business hub within ASEAN

In theory, Chiang Mai has the potential to become a regional hub, or even more than that.

Colliers suggests that part of Chiang Mai's current real estate growth is due to major infrastructural projects that were announced for Chiang Mai and the neighbouring provinces, such as: a high-speed train from Bangkok to Chiang Mai, a second airport, a motorway from Chiang Mai to Chiang Rai, and a fourth ring road. It even believes that Chiang Mai could become a major business hub within ASEAN4.

I find this highly questionable. Although these major infrastructural projects are or have been a topic in national and regional politics, I don't expect progress can be booked soon. As usual in Thailand, progress is hampered by (fears of) corruption, vested interests, lack of urban planning and incapacity of the authorities to really push through.

How can talks about a high-speed railway even be considered credible, when the current railway system is totally outdated by more than 50 years? The train from Bangkok to Chiang Mai recently derailed (causing several injuries), and otherwise is rarely on schedule.

Talks about a second airport lack proper urban planning and are biased by local vested interests. The current airport, essentially located in the southwest corner inside the city area, is in fact blocking the very existence of a first real ringroad (the so-called Super Highway), which now practically ends at the Rincome and Airport intersection. This disconnectivity of the first ringroad causes major traffic jams, especially in the southwest corner of the city area, which has a much greater impact on traffic flows than than the realisation of amy fancy fourth ringroad.

Clearly, Chiang Mai would benefit a lot from a relocation of the current airport a little out of town, which is not uncommon for growing cities, all over the world. Even without relocating the current airport, creating a real flow-through of the first ringroad (perhaps by a connection through Canal road, around the Nimmanhaemin area), would alleviate the traffic burden tremendously, much more than a fourth ringroad could ever do.

However, vested interests. lack of planning, and perhaps legal impediments block any progress or even talks about this.

One of the few projects that the government ‘successfully’ implemented recently is the huge Convention Center on Canal Road. With this, perhaps the government aims to prepare Chiang Mai for a future with more MICE business5, which in fact could fit quite well with Chiang Mai's economic profile, even though Chiang Mai is not really on the map yet as a place for conventions.

Besides that, the government has not taken any noticable initiatives to transform Chiang Mai from its current status as a “Resort City” to a major business hub.

If the government were to spearhead certain sectors to shape Chiang Mai’s economic future, I believe the creative, internet and software sector would be the most suitable ones. Currently, there is a small core of advertising and printing companies as well as architect companies based in Chiang Mai. There are a small number of software companies (run by foreigners) and many foreigners based in Chiang Mai run their overseas business online.

Promoting Chiang Mai as an innovative city with creative companies in the internet, software and advertising sector, would be a dream scenario that matches Chiang Mai’s profile perfectly well.

Other sectors, such as trading and logistics, which would need to be at the core of any future business hub within ASEAN, are an even more distant reality, lacking excellent logistic connections with neighbouring countries and lacking a business culture.

At this moment, there is no “office culture” in Chiang Mai, no business sense, there are hardly any real offices and there aren’t many jobs besides those in the tourist industry. The only real office recently established is that of Standard Tour on Changklan road, which again is in the tourist industry. And the few suits you may notice on the street are worn by Thai insurance agents, or Japanese and Korean businessmen whose factory is located in Lamphun.

If Chiang Mai is to transform into a major business hub, a leading role by the government to create the right pre-conditions is necessary, and clearly it is lacking.

Despite Chiang Mai’s strategic location in the north, near several ASEAN countries and not far from China, as of now the infrastructural, logistic and business connections are lacking and even the vague talks about a high-speed train and a highway from China to Thailand may not include Chiang Mai.

Business will decide for itself where it's best to establish, and right now most businesses are still concentrated in and around Bangkok. Chiang Mai hasn’t been able to attract major businesses, although there is some minor industry in Lamphun.

As a country, Thailand has not emerged from the typical structure of a developing country where most of the economic activity is undertaken in the metropolitan area in and around the capital.

It would be a major turn-around for Thailand if some (economic) decentralisation of a kind could happen from the capital to other areas, including Chiang Mai. Thailand would break away from the typical third world country pattern, and Chiang Mai would realise some of its potential.

However, despite the obvious potentials lying ahead, I don’t expect the Thai authorities to act adequately and play a leading role within any time soon. More likely, it will lag behind market forces and forces of nature, which will determine the future of Bangkok and Chiang Mai.

The flooding in Bangkok two years ago led both businesses and individuals to rethink Bangkok as a safe haven and sparked the investment boom we are currently witnessing in Chiang Mai, not the vaguely announced infrastructural projects in and around Chiang Mai that Colliers believes were a major factor in the developers’ decisions (even though it is used as a marketing tool).

It should stir politicians to rethink Bangkok’s position as the only economic center of the country, and supposedly, there are talks in Thai politics even to relocate the capital to another place, but again, with the vested interests in place and Thailand’s inability to even acknowledge, let alone deal with major problems in infrastructure and water management, I don’t think that is even a distant possibility.

Concluding, Chiang Mai becoming a major business hub, regionally or even within ASEAN, does not seem to be a realistic mid-term (5-15 years) or even long-term (15-50 years) option, without the government’s leading role, and it’s not likely the government will take that lead.

So the future of Chiang Mai is likely to be shaped more by market forces, with the government lagging behind.

B. Chiang Mai becomes ‘Little Shanghai’

One of the market forces completely beyond the control by the government and also completely neglected by the Colliers’ report, is the arrival of the Chinese.

Unbelievable it may be, but the true break-through of Chinese tourists coming to Chiang Mai and the rest of Thailand was caused not by any tourism promotion effort, but by the release of one single comic movie in China: ‘Lost in Thailand’. Inspired by this funny movie, and nowadays with filled-up purses, Chinese tourists started to discover Thailand in large masses. Go anywhere in Chiang Mai now, from Taphae gate to the CMU campus, and you cannot avoid the Chinese, low season and high season alike: the Chinese are here to stay.

Mistakingly, but perhaps ominously, Thai people sometimes mis-spell Chiang Mai as 'Chinagmai'.

Though most of these tourists are still back-packers, occupying guesthouses, mid-class and wealthy Chinese are coming as well.

As there are limited opportunities for Chinese to invest their money within China, naturally they are looking for investment opportunities overseas. Hong Kong is already witnessing this investment and spending pressure, with Chinese tourists lining up in front of brand stores to buy 'the real stuff' (while Hong Kong’ers cross the border to buy fake stuff). Chinese investors have bought so many apartments in the city, that the Hong Kong government had to impose stricter rules on investments from China to prevent a further heating up of the already record-high property market. The mainlanders are now circumventing this, by buying up parking spaces.

On the stock market, the same stock on the Hong Kong stock exchange went for triple prices on the Shanghai stock exchange a few years ago, simply because there is too much money that can’t find an investment opportunity.

To a much lesser degree, but still of significant impact for a provincial city like Chiang Mai, some of the Chinese investment pressure might flow to Chiang Mai. Already, Chinese investors are buying up condominium units in certain buildings. Resorts in Pai and Chiang Rai have recently changed name from farang to Chinese. Some real estate agents, anticipating on this market, have started to learn Chinese.

Clearly, the Chinese are here to stay, and investment and trade can follow tourism.

The Thai government could react on this by making it more easy to invest and do business for foreigners, which is now almost prohibitive.

It is to be seen, how large the Chinese influence on Chiang Mai can be, but it is sure that the Chinese will have an impact.

If there is a further facilitation by the Thai and Chinese government, for example in tax rulings, immigration papers, and/or company law, things could accelerate.

C. Chiang Mai expands its role as a ‘Resort City’

Right now, Chiang Mai is mainly a touristic and residential center and has a regional hub function for locals from the nearby provinces. In addition, it is an educational center, but then this is true for nearly all provincial towns, they all count a few universities.

In short, I summarise Chiang Mai as a ‘Resort City’, as it is home to tourists, backpackers, retirees, and Thai people, a lot of them directly or indirectly working in the tourism and well-being industry.

Colliers calls Chiang Mai as it is now a 'business centre', but that statement must have been made from a desk in Bangkok and can hardly be considered credible to anyone who has been to Chiang Mai.

Looking at the new construction projects, it’s noticeable that most are residential and commercial: housing estates (‘moo baan’), condominiums, apartment buildings and shopping malls. All of this is for people to live and shop, not to earn money in industry or offices. There are very few projects for offices, perhaps just a handful dispersed over town, and they are not fully occupied.

In addition, two major private hospital groups from Bangkok are building new hospitals in Chiang Mai, one on Suthep Road and one on the Superhighway, close to Big C Extra, that are obviously aiming at the more wealthy who require private hospital care.

Some projects are even explicity aimed at elderly foreigners, for example Koreans and Singaporeans wishing to retire in a building with facilities and healthcare (for example West Wind Town). Chiang Mai is one of the world's favourite places to retire (a recent survey ranked Chiang Mai in the top 21).

All of this is pointing in one direction: that Chiang Mai is expanding its role as a Resort City.

In this scenario, the main future residents of Chiang Mai will be: foreigners and Bangkokians wishing to live in Chiang Mai as a first or second home, to dwell short-term or long-term, for a holiday or to retire; and locals from the province urbanising into the city to work or study.

The main business sectors for Chiang Mai in this scenario will then still be the tourism, well-being and to a lesser extent the education sector.

III. Best Guess Mixed Scenario

These three scenarios sketch the main driving factors that can shape the future of Chiang Mai and will have profound impact on its property sector.

It is hard to predict Chiang Mai’s future in say 10-15 years, but my best guess is that a mix of the last two scenarios, with an emphasis on Chiang Mai as a Resort City is most likely during this timeframe.

This means that Chiang Mai will consolidate its position as a Resort City, while it can benefit from the influx of the Chinese, and it may benefit even more with an active role of government, which however is not likely to happen soon enough or adequately.

Even if eventually a high-speed train is realised between Bangkok and Chiang Mai, it will benefit tourism first and so it will strengthen Chiang Mai as a Resort City, before it will have a major impact on businesses.

It’s unevitable the city will grow in all directions (except for the mountain). Foreigners of all kinds: Singaporeans, Koreans, Chinese, Japanese and Westerners, are likely to invest more in especially condominiums, something which is already happening right now.

Considering the mix of scenarios and what happens in the world market, what will then be the impact on Chiang Mai’s property market?

IV. Prospect of Chiang Mai’s Property Market

While Europe and America are in crisis and Asia is on the rise, Thailand and Chiang Mai remain an attractive place for investment. With world-wide interest rates at historical lows and yields in Chiang Mai still well above what any bank can offer, many foreigners feel tempted to invest in the property market.

Currently, “normal” yields in the condominium market are about 4-6% for new condominium projects, about 8-12% for older condominium projects, and pay-back periods of about 6-10 years for housing projects.

The current level of construction is, however, unsustainable, and I’m sure that there is something like a bubble forming in the market. There are simply too many construction projects for the market to completely absorp, at least at certain price levels.

Current price levels for new condominium projects in Chiang Mai are usually not lower than THB 50,000 per sq m and some are even at Bangkok price levels. I don’t think it is possible to sustain these price levels and someone will have to take the fall.

Another important reason for this is the typical Thai business model, which lacks real entrepreneurship but instead is based on copying someone else’s successful business concept, often to establish right next door.

In the condominium and housing business, it’s not that much different. Many projects were undertaken simply as a copy of other projects, without any further market research. Often, even the financing schedule is an exact copy of other projects. Some projects have chosen a wrong location, some have a dubious financing schedule.

In addition, some condominium and housing projects may go bankrupt or may not be finished, due to various reasons. A recent article in the Bangkok post (probably applicable to the situation nationwide), confirms that. It lists problems with financing, inferior product, EIA, project design, sales price, location, improvements needed and land / exit rights as the main reasons for a halt in sales.

In Chiang Mai, recently a major project by Supalai was halted due to a Court's Verdict that the new condominium building is too close to some community court, a major blow to this well-known developer. The entire project was already sold out. Apparently, developers have difficulty to find good locations and are rushing in to be part of the game, without the proper preparations.

Depending on the mix of the three scenarios that will actually take place over time, the growth in the property sector in Chiang Mai can be more or less organic or more speculative. A gradual expansion of Chiang Mai as a Resort City may involve organic growth that can be absorbed by the market. A too rapid expansion, however, that is based on replication of concepts by developers and speculation by buyers, will unevitably lead to market corrections. Sustained investment by the Chinese can add to healthy growth. And finally, if the government takes on a leading role, more tourism and businesses could be attracted, adding to organic growth.

Simply assuming that Chiang Mai will become a major business hub, partially because of vague government plans, is pure speculation that contributes to the bubble.

Overall, considering all these macro and micro-economic factors, I’m convinced that market corrections are due. Some projects will have to sell at lower prices, accept lower absortion rates, or lower returns. In the worst case, some projects may fail or go bankrupt.

For example, the new shopping mall on the east of the city, Promenada, supposedly aims at the middle class and high-end market, but its concept ignores that Chiang Mai simply cannot leapfrog to high-end coming from its current provincial status. Allegedly, rents in Promenada are rather high, promising high returns for the investors, but they will have to accept lower returns given the competition of other malls in the market and the lack of sufficient middle class and high-end customers.

Market corrections in Chiang Mai can be drastic: one of the first condominiums I bought several years ago in Chiang Mai was from a Thai owner who sold it to me at the same price that he bought it for but 18 years ago, before the 1997 crisis. In addition, he had never rented it out, it had been empty for all that time, so there was no yield. Imagine his loss.

Though overall there will be some corrections in the market, the prospects and effects of corrections vary for each project, depending on its particular situation.

V. Prospect for different projects and buildings

There are too many projects and buildings in Chiang Mai (being) constructed right now, to give a complete overview here.

In general, the following remarks can be made:

  1. The reliability of the developer matters. Stock-listed companies from Bangkok with many projects all over the country could be more reliable than short-term aiming developers. Those projects that promise a guaranteed return over several years are most suspicious, as the guarantee is as strong as the company who gives it.
  2. Pay attention to the location as several projects are establishing at a wrong location, just to be part of the game.
  3. The profile of other buyers into the project matters. For example, if many units in a building are bought (or reserved) by speculators, the actual take up rate of the building might be lower than officially reported. Some projects announce ‘sold out’ during the first days of the sale, but in fact they are not, and after a while many units ‘re-appear’ on the market. Also, if market situations change, for example interest rates go up and many owners cannot pay their mortgage, there will be defaults on the common area fees and therefore a cut in maintenance power. The same situation could occur if not enough units in the building are sold, or if many owners don't care to pay for common area fees, because they do not stay there (which happens often with Bangkok owners).
  4. Interestingly, so far, existing buildings / projects are still in a somewhat different category than new buildings / projects. This means the effect of an oversupply of new units has not (yet) influenced the price and absorption rate of existing units too much. This is probably, because the two are priced in rather different categories and attract quite different customers (market differentiation). For example, some buyers of condominium units simply do not consider older units, and some tenants simply do not consider to rent the more expensive new units. There are, some effects between the two, however, and if building goes on unlimitedly, those effects will be more significant.
  5. While especially some new condominium units and housing projects are more vulnerable to market corrections, the potential for land is still enormous.

If you are interested in a particular building and consider investing in it, you can hire us as a Property Pal to do a background check for you.

August 2013, by our economic reporter

This report is part of a series of reports on the property sector in Chiang Mai. For assistance on your real estate issues, you can hire us as your Property Pal.

1. Unfortunately, the land office does not provide a lot of public information on this. Information based on estimates from real estate agents.
2. Colliers counts the number of individual condominium units. One condominium building consists of several units. The number of units per condominium normally ranges from some 50 to several hundreds of units.
3. Colliers left some figures unclear, omitted some definitions and refrained to clarifying this to us.
4. ASEAN stands for Association of Southeast Asian Nations and serves as a framework for economic cooperation. Recent talks promise free-er trade and migration of workers.
5. MICE business: meetings, incentives, conferences and exhibitions

Copyright: Chiang Mai Locator
DISCLAIMER: Any information about property on these pages reflects the personal opinion of our financial reporter and is meant purely informatively. No claim is made as to the exact accuracy of facts and figures nor about any future returns you can make by investing in property in Chiang Mai. Investing or di-vesting Thai property is not without risk, and the risk is to be assumed by you as an investor, and you only. Neither our financial reporter nor this site accept any responsibility to your financial decisions, which you make alone.

Leave a comment

Note: By posting a comment or question, you will not automatically be notified when other people respond to your post (as in some other social media message threads). Please check the thread yourself if you’re interested in this topic.

Please put in your real email address. It will not be displayed with your comment or on the site, but we can answer you if needed. Comments with fake email addresses may be removed.
Some comments may be edited or deleted, according to our comments policy.

Admin Locator Posted on December 01, 2014 at 04:34:59
Hello Charles, the Land Office will have such a list, however it's not likely that they will release it to the public. If you're interested in buying a single house, the best way is to decide on the area and drive around in the neighborhood.
Charles Wilcox Posted on November 30, 2014 at 16:00:22
Where can I get a list of all the single house developments in Chiang Mai with addresses? Thank-you,Charles Wilcox