The managing director and head of research of Phatra Securities in Thailand, Supavud Saicheua, says we are headed for an equities and property market bubble as a result of QE2 (the U.S. quantitative easing round two). He based that assessment on the assumption that the U.S. Federal Reserve would inject another $500 billion into the U.S. economy.
Well, the Fed injected $600 billion, so the onslaught of the twin bubbles is about to begin if Supavud is correct. All that extra cash wants to be invested where there is some decent growth, which would not be the U.S. So instead of pumping up the U.S. economy a lot of the liquidity will go to places like Thailand where the forecast is for 7% or more GDP growth next year.
We have already seen a property bubble of sorts in Thailand in places like Phuket, Hua Hin and Pattaya, places where foreigners pay several times the Thai price for property they cannot even own.
Those prices retracted strongly during the global financial crisis but perhaps they will be re-inflated, at least temporarily, with the new flood of dollars. However, it would seem that the steady decline in the dollar against the baht might have a dampening effect, making properties substantially more expensive even though the baht prices have not increased.
Contrasting the bubble/burst/bubble action of those locations popular with foreign investors, property in the Khao Yai area has seen a steady strong upward trend in price for the past five years and more. There are no indications of a bubble or speculative buying, just a steady strong demand from Thais, not foreigners, for vacation homes, retirement homes, and refuge from Bangkok.
Add to that the even greater appeal of Khao Yai’s golden triangle region that suffered no flooding even as 50 year floods affected vast areas of the Korat plateau as well as all the cities along the Chao Phraya river. The fundamentals for the area look stronger than ever and as high season is now beginning buyers are appearing in greater numbers.