It is counter-intuitive that a credit crunch could actually help an economy, yet the current subprime crisis in the US is having a sobering and very positive effect on the Thai property market. In a country which recently emerged from 15 years of military rule, and very limited opportunities for investors, the government is now actually encouraging investment into the area. The long awaited opportunities in the country could create a bubble, were it not for the US situation, which is having the effect on the Thai market of creating more realistic valuations and better long term stability.

Thailand is the second largest economy in South East Asia, and the new government's different take on foreign investment in the country will encourage its further growth. The specific changes that the new government has made include reducing transfer fees on new properties effectively to nil (from 2% to 0.01%, until the end of March 2009), as well as reducing the specific business tax from 3% to 0.01%. This is a positive change for the economy, since the credit crunch is having the indirect effect of lowering the amount of money coming into Thailand in total. Much of the reduction in capital has come from Singapore and Hong Kong, which have been traditionally large investors in Thailand, but also have subprime obligations.

High inflation in Thailand has been mentioned as a worry by some international investors, but has been dismissed by the Institute of International Finance. It says that the problem should subside shortly, as markets work to stabilize themselves under their own terms. It believes that worry over the inflation situation has been greatly exaggerated.

One mitigating factor in the Thai property market is that there have been price increases of up to 12% since 2003 in some specialized markets, such as the luxury condominium market. These price gains are set to increase, as a shortage of property means that demand will soon outstrip supply.

Tourism in Thailand has always been a staple, and will continue to be a growth industry. Tourism is increasing by 20% per year, and islands like Koh Samui are attracting the proportion of the visitors. This fuels demand for leisure and tourism property development, and also brings some money into the region's economy to offset the effect of lower international investment from Singapore and Hong Kong. The tourism boost comes from an advantage which is unrelated to the US situation, or even to many global economies -the fact that interconnecting flights are available through Thailand at much lower prices than many direct flights. So, Thailand's geographical position makes it a strong candidate for an increase in tourism and a resulting boost to the Thai property market.

Although the general effect of the credit crisis on property investment in Thailand will be to slow it down, the net effect will not be too great. Investment will be more measured and calculated, and this means that the region's prospects as a long term investment look more attractive by the month. Property valuations recently have been much more realistic, as The Bank of Thailand's restrictions on lending have an impact. This will protect the Thai market over the medium and long term, and ensure that growth is sustainable and investments are more secure.