July 12, 2013 6:02 pm

Chiang Mai is tempting Thais as property market recovers

Thailand’s second city is becoming first choice for many local buyers, with condominiums particularly popular
Aerial view of Wat Phra That Doi Suthep, a Buddhist temple overlooking Chiang Mai©Corbis

Aerial view of Wat Phra That Doi Suthep, a Buddhist temple overlooking Chiang Mai

Chiang Mai is often hailed as one of the most liveable cities in Asia, occasionally the world. Despite the dubious provenance of many such surveys, the fact remains that Thailand’s historic second city has a laid-back, cultured air invariably absent across the region.

Hundreds of tranquil Buddhist temples, a snaking river flanked by traditional wooden houses, all framed by verdant mountains ensures the 700-year-old capital of the ancient Lanna kingdom retains the feel of a genuine Asian city – in the face of modern developments.

More

IN House & Home

Yet Chiang Mai suffered a decline even before the downturn. Despite being a business hub at the nexus of old trading routes and a major academic centre, Thais looked down on Chiang Mai as Bangkok’s country cousin. But tourist numbers in this gateway to the north have recently hit five million annually amid clear signs of a recovery.

“Go anywhere in the city and there’s new construction,” says Ed Schroeder, of property agents Century21 Lanna, “but the main interest in the market is Thai, particularly in condominiums, over the past year.”

International buyers have long favoured Chiang Mai as an attractive city for business and, more recently, retirement. The draw is a milder tropical climate, low cost of living, good roads, green spaces, culture and excellent food – be it Thai or international.

“By a process of elimination Chiang Mai comes out on top when you look around at other cities in Asia,” says Keith Humphreys, a long-time resident of the region and executive director of Chiang Mai-based property consultancy Prestige Property Services-Asia. “Many expats have lived and worked in Asia and cast around for a good city to retire to. Chiang Mai has all the amenities of Bangkok with few of the drawbacks.”

Property prices are a fraction of those elsewhere in the region and less than half that of Bangkok or Phuket. Chiang Mai specialists Elite Property is marketing a three-bedroom, two-storey 310 sq metre house with an extensive garden. The property located in Doi Saket district, a 15-minute drive from downtown Chiang Mai, and is priced at 8.9m baht (£177,000).

As many as 40,000 expatriates – mainly American, British, Australian, Dutch, French and German – already call Chiang Mai home. But there is also a growing number of Japanese and Korean retirees who spend four or five months a year in Chiang Mai during cold east Asian winters, drawn by the climate and good medical care.

However, the most significant expatriate influx is mainland Chinese buyers. “The arrival of the Chinese is fairly recent,” says Schroeder. “Middle-class Chinese families come here and buy a house to live in because it’s much cheaper than China. They put their kids in one of the international schools, which also cost much less. They like Chiang Mai above southern Thailand because it’s not so packed, has mountain views and rivers, and something approaching seasons.”

However, the recent rise in demand from international buyers, which slowed on the back of the global downturn, is dwarfed by that of Thai purchasers. Property agents point to the longstanding ban on foreign landownership, which effectively limits international buyers to 30-year leaseholds on landed properties, as a significant drawback. And there are growing fears that the questionable ways many have sought to circumvent the law – by buying houses through Thai nominees or proxies – will soon come under scrutiny. “[The ban] is a big constraint on the Chiang Mai housing market,” says Patrick Mulcahy, Elite Property’s chairman. “There’s a limited market for foreigners buying houses and it’s not helped by pronouncements that there’s going to be a crackdown. Agents were notified again recently that authorities plan to carefully examine freehold house purchases by foreigners.”

The Veranda resort where condos cost from £108,000

The Veranda resort where condos cost from £108,000

Overseas buyers generally opt to buy larger condos, which they can purchase with the freehold if at least 51 per cent of the units are Thai owned, as the land is not considered under foreign ownership. A one-bedroom, 86 sq metre unit with freehold in the leafy suburb of Hang Dong is being offered by CBRE for 5.2m baht. The condo is situated within the compound of the five-star Veranda High Resort and includes free access to the pool and other facilities.

Chiang Mai has seen a surge in new condominiums in the past 18 months. Surachet Kongcheep, senior research manager at Colliers, says the first five months of 2013 saw the greatest condo growth in 17 years – up 1,640 of the total 18,640 completed units – with prices rising 11 per cent on last year. But the newest additions tend to be small – one-bedroom apartments averaging 40 sq metres – and aimed at those Thai buyers who dominate the market, including the 100,000 students attending the city’s 10 universities.

The region’s thriving economy, with unemployment at just 1 per cent, according to Century21’s Schroeder, has been bolstered by the arrival of 10 shopping malls, a planned fourth ring road and high-speed rail link to Bangkok. The proposed creation of the Asean Economic Community by 2015 is set to cement Chiang Mai’s position as a commercial hub serving nearby Laos, Myanmar and southwest China.

The past 18 months has seen a steep rise in the sale of new villas, invariably in gated communities. Pran Exclusive Residences has a development of 20 villas due for completion by 2015 near the Royal Flora Ratchaphruek gardens. One four-bedroom 600 sq metre house is offered for 19m baht.

“The market was sleepy until the floods in Bangkok 18 months ago,” says Elite’s Mulcahy. “Many new buyers are generally Thais from Bangkok looking for a better quality of life.”

-------------------------------------------

Buying guide

● Average daytime temperatures range from 28C to 36C, cooling to 14C to 24C at night

● Chiang Mai is considered as a “low threat” for overall crime by the US State Department

● International buyers cannot get mortgages from Thai banks and must transfer 100 per cent of the purchase price to Thailand in baht

● The population of the Old City is about 160,000, with 1m people living in the total metropolitan area

What you can buy for . . . 

£100,000: A two-bedroom house with pool in the Sansai district

£500,000: A three-bedroom, four-bathroom village house with pool in Chiang Mai’s Mae Rim Valley area

£1m: A five-bedroom, seven-bathroom modern Thai-Lanna style villa in the Hang Dong area

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

LIFE AND ARTS ON TWITTER

More FT Twitter accounts