Potential for retirement properties in Thailand

by Bill Barnett of c9hotelworks.com

While a number of property offerings in Phuket, Hua Hin, Pattaya, Chiang Mai and more recently in Bangkok have promoted themselves as retirement-centric offerings, the jury is still out on the broad success of the sector.

Despite retirement communities and assisted living being mainstays in Western countries like the US, UK and Australia, these are for the most highly domestic offerings.

Some of the key market challenges are the absence of a secondary sales market, disconnect with national healthcare schemes, difficulties in financing offerings and the sheer distance from relatives or family units. Additionally, intrinsic differences in nationalities of prospective end-users has created a somewhat confusing potential geographic source of business.

Thailand does have a widely promoted retirement visa program but it has not been linked to the real estate market. Malaysia’s ‘My Second Home’ initiative has been a leader in Asia and has effectively tapped these two issues.

Two developments that are being watched in the property world in the Kingdom, the first is Nye Estate’s Otium Living which is working closely with the UK retirement specialist group Audley Villages, with its initial offering coming to Phuket’s MontAzure in Kamala and plans to expand in Bangkok.

Second is MQDC’s The Forestias in Bangkok which is aimed at multi-generational living. A number of iconic groups are involved in this undertaking including the Foster + Partners, Six Senses and Harvard T H Chan School of Public Health on wellness. What’s unique about this project is the inclusion of older generational housing into a larger green, eco and family- oriented community.

At C9 Hotelworks we have advised on a number of retirement projects in Thailand, Philippines, Mainland China and Japan. One of the key issues for the sector has been developers who are looking to simply brand real estate and not do the hard yards on programming a working community.

One clear idea that is emerging, that we feel has strong broader potential is a shift from a property offering into shorter-term lease options, membership or rentals. This becomes a recurring cash flow play versus the typical blow and go real estate structure.

A strong indicator of the upside potential is Australia’s property group Lendlease’s estimated USD1.4 billion investment into Mainland China’s senior living marketplace. On offer are transferable long-term memberships with a value of approximately USD250,000. Wellness and hospitality offerings are key components of the end-product.

The reality of lower, more rationale pricing points with an understanding that senior living is transitory in nature and the long-term prospects will be a transfer into assisted-living or family care.

We continue to see real estate developers go blindly into creating offerings which do not recognise the need to build a secondary resale mechanism as well and trying to price offerings on legacy real estate models. For the most part these are going to be highly stressed financial models and not sustainable.

Senior and/or retirement living is a reality for a “greying Asia”, but for now, the lack of fundamental models and reality has yet to take hold. It will be interesting to see how Lendlease’s China outing goes, but they certainly look to be set on the right path ahead.

As for the prospects of the Kingdom, one astonishing data point on Thailand’s potential for senior living is that by 2030, according to the United Nations a quarter of the population will be over 60 years of age. Falling birth rates and an aging population have created a first world situation in the making. There is a growing long-term market, if someone can just create the right product.