High-rise condominiums boom in Bangkok's central business district. Thailand's property market continues to be dominated by local investors, a study says. (Photo by Seksan Rojjanametakun)

The Thai market continues to be dominated by local investors because of the restrictions on foreign ownership, specifically the prohibition on foreign entities owning land, says CBRE, a leading property consultancy.

At the developer level, foreign investment is restricted to bona fide joint ventures such as those agreed between Mitsui Fudosan and Ananda Development Plc along with Mitsubishi Estate and AP (Thailand) Plc to develop condominiums, said James Pitchon, executive director and head of research at CBRE Thailand.

Individual foreign investors can buy up to 49% in area terms of a condominium development, but the requirement that all funds must come in from overseas as foreign currency (effectively preventing foreign investors from borrowing locally) remains in place.

CBRE reported international investors wanting to diversify their real estate portfolios helped Asia-Pacific record a steady flow of overseas capital, with investment turnover increasing by 9% year-on-year to US$13 billion in the first half. CBRE's Asia-Pacific Investment Guide 2015 provides a comprehensive overview of the investment terms, foreign ownership restrictions and key investment features of 15 markets.  

Richard Kirke, managing director of CBRE Capital Markets Asia Pacific, said the region's real estate continued to demonstrate strong, sustained fundamentals. Relative to the volatility in the global equity markets, Asia-Pacific's real estate provides investors with superior risk-adjusted returns, he said.

Real estate-related levies are playing a larger role in selected markets with the aim of curbing speculative investor activity. A number of markets have already imposed preventive measures.

In 2013, Singapore introduced a more rigorous debt servicing ratio while Hong Kong doubled the stamp duty on foreign property investments. Other markets are planning new tax measures. Taiwan has announced a new capital gains tax, effective Jan 1, 2016, to replace the current luxury tax, while China's value-added tax will be widened to cover a broader range of real estate-related services.

Ada Choi, senior director for CBRE Research Asia-Pacific, said in recent years governments had increased taxation and tightened lending on property transactions as part of wider cooling measures in domestic markets. But investment demand in Asia-Pacific remains high, which means these cooling policies are expected to stay. 

"We're also seeing more investors prefer core assets -- which require lower leverage ratios -- that are being backed by international and regional institutional capital," she said. "As a result, they are less affected by the limitations on leveraging and the higher transaction costs aimed at dampening speculation." 

Conversely, a number of emerging economies, particularly in Southeast Asia, have relaxed restrictions on foreign direct investments in a bid to attract overseas capital to boost domestic growth. Deregulation measures include permitting full foreign ownership of properties in Vietnam and full ownership of luxury residential condominiums in Indonesia, while India and China are allowing for more flexible investment policies such as lowering minimum capital requirements. 

"In addition to the ongoing urbanisation and rapidly expanding middle class in many emerging economies, the policy shift of some governments to more open foreign investment policies sends a clear and positive signal to international investors," said Mr Kirke.