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Q&A with Thailand Real Estate Guru Stefan Picot – Managing Director of Find Thai Property
1. What is the outline process of purchasing property in Thailand for an overseas buyer?
Overseas buyers are able to buy 100% freehold property in Thailand if it is a condominium (apartment) type property. However, land and houses are only available in Thai name or Thai company name. The total floor area of condominium buildings have an ownership structure that is split 51% Thai name and 49% foreign name. As long as the 49% foreign quota is available in the building then foreign nationals can buy in their personal name without any restriction. For off-plan purchases (under construction), a typical deposit requirement is between 20% – 30% with nothing more payable until completion. It is advisable to visit and see the properties if possible, but it is not a requirement. If a buyer can’t make it to Thailand it is not necessary to be there, as lawyers can be used for power of attorney in the absence of the buyer. All that is required to buy is a passport copy, and personal details. There are a number of key points in the process but most important is the payment process where there are legal requirements.
2. How can I send my money to Thailand for the purchase of property?
Foreign buyers should be careful to follow the correct payment process in order to register the property successfully in their name at the land office. The Thai law requires that foreign buyers must send their money via standard international bank transfer from any overseas bank into Thailand using a foreign currency (anything except Thai Baht). For foreigners who live in Thailand and earn Thai Baht, the same applies and they must use money from overseas. The land office requires a “Foreign Exchange Certificate” from the receiving bank in Thailand on the day of title deed registration as proof the money came from overseas. Paying a small booking fee to reserve a unit (usually around $1,200) is acceptable by cash or credit card in the showroom.
3. I was researching a condominium and maintenance fees and ‘sinking funds’ were mentioned. What are these?
A “Sinking Fund” is a one-time payment that is used as an emergency fund for any one-off repairs or improvements that may be required for the development at some time in the future (e.g. repainting the exterior every few years). Payment for the Sinking Fund must be made at the time that the buyer receives delivery of the apartment. The cost of the Sinking Fund depends upon the size of the apartment and so the price is quoted per square metre.
“Maintenance Fees” are payments required for the day-to-day running of the project (e.g. salaries for security, the receptionist and cleaners; upkeep of swimming pools; electricity for the lifts, etc.) As with the Sinking Fund, it is based upon the size of each apartment in square metres and the price quoted is for the monthly fee. Most developers require a full year’s payment of maintenance fees in advance once the apartment is handed over and then to be paid annually in advance thereafter.
4. Is a house or a condominium the best investment in Thailand?
We would strongly recommend a condo as a better investment than a house due to the ownership restrictions for overseas buyers owning land in Thailand. Houses will offer better value for money but foreign nationals will need to set up a company with 51% Thai shareholders to own the land. A condo is a much more attractive way to invest because it is a risk free ownership in personal name. It also depends on each individual’s requirements. For example, many investors plan to stay in their property on a regular basis and a house could suit them better than a condo. It is possible to own a house as a foreigner. Thousands of foreign owners exist in Phuket alone, but more diligence is required. It is important to note in our experience it is much easier to re-sell a condo than a house, so there is more flexibility on the exit strategy for the condo.
5. Will I get a visa with my property investment in Thailand?
There is no government scheme that exists where foreign nationals get a visa automatically with their property purchase. However, there are some developers who team up with special companies such as “Thailand Elite” to provide exclusive 5 year visas to their buyers. However, this is also available as a separate service and is usually factored into the price so be aware of hiked up rates. It may or may not suit you. It is relatively simple to stay in the kingdom on a multi-tourist visa up to 6 months a year. For buyers over 50 years of age there is a full time retirement visa available, and there are unique investor visas available for buyers who invest 10 million baht or more in the kingdom.
6. How do I know the property I am buying is of good construction?
This is all down to local knowledge, investigation and experience. If you are willing and able to come and view properties in Thailand we will show you around so you can see the various projects on offer with your own eyes. After years of experience we have learned that different brands of developers have different levels of finishing quality and we like to be impartial about this point to our clients. We do a thorough due-diligence on all our projects before putting them to market and we ensure that our offers achieve an international standard of expectation on quality. Most buildings will offer a 2 year warranty for the interior of your unit and the sinking fund (mentioned above) protects all the owners for the future.
7. Is my deposit on Thailand property refundable?
Generally the deposits are non-refundable but this depends on the project. In some cases deposit’s are taken to hold units in a pre-launch sale before the price is released. When the price is released on launch day the buyer has the choice to continue with contract payment or have his booking fee refunded.
8. Is a condominium close to the BTS line the best long-term property investment in Bangkok, despite the higher prices?
Being close to the BTS line is very important to most buyers and tenants in Bangkok. In any major city the vicinity of your local metro can influence the land price heavily. We offer projects that are only in the CBD and almost all our listings are within 1km of the BTS / MRT lines in Bangkok. Buyers will pay a premium to be within 200m of the station and rates get lower the further you go beyond that. If rental occupancy is important to your investment plans then the closer, the better. However, you may find the price of a property further away from the BTS (but still accessible) to have a much more attractive buying price.
9. Can I buy property in Thailand with cash?
You can pay a booking fee of up to $2,000 in cash but the contract deposit and main payments for the property must be sent via international bank transfer only. This is required by Thai law.
10. Can I form a Thai company to buy Thailand property. If so, how?
Yes, it is possible to form a Thai company for owning a property. We strongly recommend to use a credited lawyer service to set up a company with correct guidance in how to manage the compulsory 51% Thai shareholders. Some property developers will offer ready-made companies for foreign buyers, but again, you may want some legal assistance to ensure it is set up correctly.
11. Is it best to invest in pre-sale property, or a property that is ready to move into?
For investors we always recommend to buy off-plan as early as possible in a new project. Developers will generally only build a new residence if they can compete with local market rates. You can achieve rates as low as 20% below the market average in the off-plan market. For foreign nationals it is also important to get in early to ensure the 49% foreign quota is still available in the building and to get the best choice of the units. Developer’s will increase their prices by as much as 15% during the course of the build process so there is an accelerated rate of growth in the first one or two years of construction. Finally, the demand in all of Asia is huge for new property and the more up-to-date or modern your residence is, the better. Every year new amenities become trendy. For example, in 2016/2017 we have started to see more co-working business spaces appear in residential projects. Keeping up-to-date with the fashion is important in Thailand.
12. How is land measured in Thailand and what are the average prices?
In Thailand, land is measured in their own unique metric system of “Wah”, “Ngan” and “Rai”. It is important to know these as it can create legal confusion. The actual condominium unit space is always quoted in m2.
1 Wah = 4m2 / 43sqft
1 Ngan = 400m2 / 4,305sqft
1 Rai = 1,600m2 / 17,222sqft / 0.40 Acres
Prices are typically calculated on a price per m2 basis. Here is a rough guide to price ranges related to our listings in our 4 main cities today:
Bangkok – $2,000 per m2 -up to- $20,000 per m2.
Pattaya – $1,700 per m2 -up to- $8,600 per m2
Chiang Mai – $1,500 per m2 -up to- $4,300 per m2
Phuket – $1,700 per m2 -up to- $10,000 per m2
13. What rental yield can be expected in the different areas of Thailand?
Based on long-term rental rates in Bangkok the rental yield is an average 6% per year. In tourist regions the rate is an average 8% per year. Be sure to consider the 6 month rainy season which affects the occupancy in tourist areas, whereas Bangkok as the capital city is more consistent. If you rent short-term you can achieve up to 12% per year in Thailand, but be sure to check the rules and regulations of your residence before offering short-term leases.
14. I want to buy a condo and live in it for a few months of the year and rent it out for the rest of the time. Is this allowed?
Yes, this is allowed. Be sure to inform your rental agent your intended dates for your stay in advance. Some projects offer rent guarantees, whereby they take control of your property and guarantee you a yearly rate for a fixed number of years. Sometimes, they will offer a few weeks allowance per year for the owner as part of the scheme.
15. Can a foreigner buy land in Thailand?
It is not possible to own the land outright in a personal foreign name. A foreign buyer can purchase land in Thailand by opening a Thai company with at least 3 Thai names holding a 51% share. The foreign buyer would be the majority shareholder, owning the remaining 49% share.
16. What taxes are payable on the purchase of property in Thailand?
This varies on the offer from the seller. The standard process in Thailand for all new projects is the buyer should only pay 1% of the property value for the “transfer name fee” at the land office, all other taxes are paid by the seller. In some cases a private individual seller may negotiate to split all taxes with the buyer 50:50. If the buyer accepts this it can lead up to a purchase tax in the region of 3.5% of the appraised value.
17. What taxes are payable on the sale of property in Thailand?
We have a full explanation of taxes on our website page.
When selling a property the following taxes are applied:
Transfer Name Fee (2%) – Split 50/50 between buyer and seller
Stamp Duty (0.5%) – If land has not been transferred in last 5 years. Paid by seller
or
Business Tax (3.3%) – If land was transferred within last 5 years. Paid by seller
Personal income tax – Standard rate of income tax applied to both Thai and foreign nationals – Paid by seller
18. Can I get a loan to buy a house or condo in Thailand as an overseas buyer?
As the Thai law requires overseas buyers to send their funds from overseas, local bank loans can’t be applied. However, you will find that banks in Malaysia, Singapore and Hong Kong do offer loans to foreigners buying property in Thailand. These are banks such as ICBC, UOB, Citi Bank and Bangkok Bank. Interest rates vary from 5.5% up to 7%. Due to high interest rates they are not very popular so buying early in a new project is a solution where you can get a 0% interest direct-developer payment plan. A typical payment plan is a deposit of 20% – 30% and nothing until completion after 2 years.
19. What is the definition of a condominium?
In modern day terms it is an apartment building or flats – a residential building that is shared by a group of individual owners. It is a combination of two latin words: “con” means ‘together with’ and “dominion” means ‘right of ownership’ – “together with right of ownership”. The term can represent both a single property within the building, or the whole building itself. In Thailand we call them “condos” for short!
20. Am I required to have visited Thailand or be present in Thailand to purchase a property there?
It is always a good idea to visit and do a viewing of properties with us, however if this is not possible there is no restriction whether you want to buy from overseas or locally. If buying from overseas all paperwork is sent via international courier and we offer power of attorney services for the transfer of ownership process. In many cases buyers will purchase with us remotely from their home country while others will visit for a complimentary viewing to choose a property. Once the property is purchased they can leave the rest of the process to us even beyond ownership transfer and rental management. It is advisable to come to Thailand to open a bank account at some point to help receive rental payments and pay maintenance fees. We understand that many buyers prefer not to have to do everything themselves, that is why we provide a whole spectrum of services from rental management, legal assistance down to furniture packages so that they can invest “hands free” and let us generate their income.
21. Can I legally rent out my property in Thailand?
Yes, we recommend filing personal income tax returns with the Thai Revenue Department, this will allow you to claim tax refunds from your GROSS yearly income. The first THB 150,000 (approximately USD 4,325 at the time of this article) per year is exempt from personal income tax.
22. Is it safe to buy Thailand property via a Thai company?
It is widely practised to open a Thai company to own a property or land in Thailand. There are methods which lawyers use to form companies to protect you as director against the 51% of Thai shareholders. Overall, the foreign name would be the largest shareholder with 49% and hold major control of the company, but if you are looking for a simple investment we do not advise company ownership. Even with the right company formation, there is an element of risk associated. It is simpler and provides further safety guarantees if you focus on condominiums. Company formations are used by seasoned Thailand investors or buyers with lifestyle requirements who may be retiring and need more living space with a private garden.
23. Will I be able to sell my property easily in the future?
This will be the biggest challenge of the investment. With our guidance – yes! Investing in Thailand is very productive if you follow the demands of the market. For example, some overseas buyers can be astonished at the small size of properties in Thailand and try to buy much larger spaces that they are more accustomed to. However, they are being built small for a reason because that is where the local demand is. Smaller properties create more affordable prices and that is where the developers are finding their success. Removing your heart from your head can be a challenge when choosing a property that is right for investment but does not meet your own living space requirements. With our guidance you can buy property on the back of local expertise to enhance your chances of selling. It is important to study which kind of properties sell or rent faster than others, and avoiding generic layouts within a building can greatly improve your chances of an onwards sale. In Bangkok, did you know on average in a new building that 85% of units are 1 bedroom? 70% of the rental market is also dominated by 1 bedroom units. This demonstrates that 1 bedroom units have the most demand by far overall. On the other hand, an investor may consider that 2 bedroom units are undersupplied in the market with much less competition. With a collective approach and the right support you can choose the correct location, the correct project and the correct layout. There is not one simple investment solution that can be applied to all areas. Different locations have different market trends so identifying these is absolutely essential to a successful resale.
Any further questions? Please add them to the comments below and we’ll endeavour to get them answered at a later date.
We are Thailand Real Estate experts providing impartial advice and full ongoing support for overseas property buyers.