2014 was a rough year for Thailand. After martial law dampened tourism, a crisis in Russia, one of its major source of property investors, was hit by a serious financial crisis that saw the collapse of the ruble due to a fall in energy prices and Western sanctions over its military action in Ukraine.
Russia takes the second position in the list of countries providing the highest number of tourists to Thailand after China. This means the economic problems in Russia can have direct and devastating impact on Thailand’s tourism market, and by extension, its property investment market, which is closely linked to the influx of overseas visitors.
Below is an analysis of how Russia’s economical woes have affected property investment in Thailand.
Russian Woes Have Reduced Potential Property Investors Due To Reduced Tourist Numbers
As a result of a severe financial crisis, Russians have had to cut back on oversees holidaying. Although this does not affect Thailand alone, it has caused serious changes to the contribution of Russians to Thailand’s real estate market. For instance, after the crisis, the number of Russians visiting Pattaya fell by a jaw-dropping 70%.
Obviously, such a sharp decline in tourists from Russia means that there will be less Russians who will be part of the lucrative Thai real estate market.
The Economic Crisis Has Caused A Reduction In Property Prices
The Russian crisis has had an impact on the prices of real estate in Thailand. Firstly, the demand for property has slightly gone down due to the severe impact the financial crisis has had on this category of property buyers. Additionally, the Russian economic troubles have affected the Thai baht in some way since its demand has gone down due to the decrease in Russian property investors.
The slight drop in the value of Thai baht has obviously made the prices of popular properties to go down,, since foreigner can now get more baht’s per unit of their native currencies.
Property Investments Targeting Russian Tourists Have Suffered Massive Declines In Profits
Thailand is the second most popular destination for Russian tourists in the South East Asian region. Because of the high number of Russian visitors, some property investors have specifically targeted this demographic by setting up properties in the top destinations for Russian tourists, for instance, in Pattaya. Restaurants that offered popular Russian dishes are now almost empty, and hotels that made most of their money from hosting Russian tourists have experienced drops of up to 80% in bookings.
Likewise, property owners who have properties that are rented mostly to Russian tourists are facing a difficult time financially.
Several Russian Travel Agencies Collapsed
Most tourists and potential investors travel to other countries with the assistance of travel agencies. However, around mid-2014, over 20 Russian travel agencies and tour operators collapsed. This meant that travels to other countries, including Thailand would be more difficult.
Additionally, it would be harder to find good travel bargains, which played a significant role in encouraging Russians to visit Thailand. Consequently, many potential Russian tourists have had to cancel their plans to visit Thailand due to lack of agencies that can offer them great travel deals to Thailand.
The economic troubles that have affected Russia have spilled to Thailand, which is one of its top destinations in South East Asia. A big segment of the Thai property market has relied on the influx of Russian visitors and property investors into the country.
However, the Russian economic crisis has caused such property investments to suffer due to steep falls in demand for real estate properties, especially those that benefit primarily from Russian visitors.