Buying Property in Thailand

Hi

This little bit on investing in Thailand is from my latest newsletter. I hope it is of interest.

Buying Property in Thailand

Thailand is a beautiful country with great beaches, beautiful national parks, cheap shopping and nice people. Property is still cheap with high rental yields and potential capital gains so many non Thais are purchasing homes and investments. I was in Thailand recently and did some brief research into the property market there.

Probably the first thing that surprised me was the prices. Picking up some for sale brochures in English, I thought prices were very similar to Sydney. But these were luxury properties in the entertainment areas – marketed to foreigners. Later I started talking to the locals and getting a feel for the average property. Firstly I asked people what sort of rents they were paying. Nice brand new semi furnished bachelor apartments with air conditioning are available for around 5500B per month (approx A$183) in the capital, Bangkok. Electricity, phone, water are extra. These buildings have concierge and security. Older rooms with no air-conditioning are going for around 2500B per month (A$83). And this is in Bangkok! These apartments do not have kitchens, but have toilets, showers and a balcony. They are not too bad, and I could even live in one.

Upcountry, I have seen houses being available for rent from 500B per month. i.e. A$16! It seems nice large homes can be rented for around 5000-10,000 per month (A$160-$320). These are basically concrete rooms with traditional toilet and a traditional shower, but still very liveable.

Ownership Issues

There are various problems with buying property in Thailand. The main one being that foreigners cannot own land. There are two ways around this.

1) Long term leases. A 30 year lease for land can be entered into with 2 options to renew, effectively giving 90 year lease. These leases can be drawn up to allow for the property to be transferred into the foreigners name if the law changes and to also allow the right to sell or reassign the lease. So you buy in a Thai’s name, and have the lease drawn up and added to the land title so anyone purchasing will see the lease. This should make the purchase unattractive, making it difficult to sell.

Once land is leased, then the foreigner can build on it. Ownership of buildings is possible, but not the land.

2) Form a limited liability company. As long as the company has 51% shareholding by Thai nationals, it is possible for the company to own the land. There are various ways the 49% shareholder can protect their interest such as being sole director, having several shareholders who are not know to each other and varying the articles of association to allow for greater protection of the minority shareholder. The foreign director can hold shares which give them a greater voting power so that they can control the company.

Obviously these are not ideal ways to ‘own’ property.

3) There is one way to own property in your own name if a foreigner and that is to buy a unit or a condominium. Thai law allows foreigners to purchase units in their own name. However there are some restrictions, similar to Australia, in that only a certain percentage (49%) of the complex can be owned by foreigners. And the funds for purchase must come from overseas.

Finance

Obtaining finance to purchase your Thai property can be a problem. Firstly, being a non resident will make local banks reluctant to lend you money. Overseas banks will generally not lend you money secured on foreign property. If you were working in Thailand for a while (maybe 2 years), then it would be possible for you to possibly qualify for a loan. LVRs seem to be around 80% with interest rates around 6%.

Finance Options:

1) For those working in Thailand, Finance may be available with a local bank.

2) Bangkok Bank, Singapore Branch is apparently offering finance to non-residents at 70% LVR, PI over a 10 year term. Application fee is S$5000 and you must go to Singapore to sign documents in person.

3) Vendor Finance. A few developers offer vendor finance whereby they will sell you a property with a small deposit and the remainder payable within the next few years.

4) It would also be possible to obtain a Line of Credit on an Australia property and use this money to purchase overseas.

Yields

Yields in Bangkok seem to be generally around 7-8%. This can vary depending on the building quality and the location etc.

Taxes

There are various taxes on Thai Property such as:

Stamp Duty = 0.5%

Transfer Fee = 0.01%

Business tax (if held less than 5 years) = 0.11%

Income Tax

Land Tax

There is no capital gains tax in Thailand.

Foreclosures

There is at least one bank that offers foreclosure properties for sale. See the website of Kasikorn Bank in English at:

http://www.kasikornbank.com/PropertyForSaleAnnouncement/1,2098,-EN-1,00.html

Some Thai Links

Department of Lands, Thailand http://www.dol.go.th/eng_version/menu.php

Real Estate Data, Property Lines http://www.propertylines.co.th/

NC Group. http://www.ncgroup.co.th/

Thai Companies and Land Ownership: http://www.property-report.com/archives/september05/analysis_thai_companies_land_ownership.htm l

House Construction Companies (mostly Thai only)

http://www.lalinproperty.com/

http://www.ncgroup.co.th/piyarom/houses.htm

http://www.mk.co.th/

http://www.buathong.com/

http://www.mk.co.th/

http://www.property-perfect.co.th/

http://www.wangthong.com/

http://www.senavillagroup.com/

http://www.supalai.com/

Terryw
Discover Home Loans
Parramatta
[email protected]
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