Planning retirement or investment in property in Thailand? Here’s all you need to know
It is a country with unique property laws and non-residents have limited purchasing powers
Thailand is a top destination for many nationalities to retire to, buy holiday homes or invest in realty.
You’ve looked into it, too, but are a bit confused, especially with the rules and processes involved? Don’t be, we have all the information you need to help make that decision.
Can a non-national buy property?
Buying property as a non-resident in Thailand is complex but not impossible.
It is complex and a good lawyer is essential in the process – all stemming from a prohibition on foreigners from owning land.
The cost of living in Thailand
The Thai Baht exchange rate is very favourable for investors from the UAE. And the cost of living in Thailand is low. Medical care is excellent and the low cost of health insurance makes Thailand an attractive proposition for retirees living on a set income. But those planning to live full-time in Thailand must be able to prove that they are independently and financially stable a pension or savings that are worth THB800,000 – Dh94,950
Initial steps to buying or investing in property:
• Choose an area or community you want to be part of. A good way to do that is by actually visiting the places and talking to residents.
• You can also check house prices and how your home currency fares against the Thai Baht.
Here are some areas you could look into:
Bangkok: The vibrant capital, built along the banks of the Chao Phraya River, is one of the great cities of the world. Home to more than 10 million residents, it offers a blend of history, heritage, great nightlife and bustling markets.
Chiang Mai: This fortified city set in the northern mountains showcases history and heritage and is a draw for investors seeking a slower pace than that offered in Bangkok. It’s the perfect place for learning Thai cooking, history or the Thai language itself.
Hua Hin: This city on the Gulf of Thailand coast is three hours’ drive from Bangkok and offers long beaches that are lined with modern condominiums, while villa homes and planned communities also nestle in the adjoining verdant hills.
Phuket: The ultimate leisure area famous for its natural beaches that attract tourists from around the world — and investors looking to purchase villas and condominiums for personal use or investing returns on the Andaman coast.
Koh Samui: A lush island set in the Gulf of Thailand that draws millions of tourists to its beaches and villages. It offers the best of both worlds – natural beauty and easy access to neighbouring islands
Pattaya: A bustling port city but with beaches and bustling night life. It’s a short drive from Bangkok International Airport, yet far enough away to provide a different perspective on Thailand.
Are you going to pay for this with your savings or borrow?
Then choose a bank or a lender for options. Following that you also need to talk to them about transferring money overseas to make payments – the best options in terms of rates, charges, etc.
Property options to suit your budget
The Thai property market offers a whole range of investment options to fit you budget and your ambitions. While the restrictions on foreigners are a challenge, they’re certainly not insurmountable. At around 8.4 Thai Baht to the UAE Dirham, your money goes a lot further in the Thai market.
Dh300,000
Certainly, this level of investment can see you able to afford a 1-bedroom condominium in Pattaya or Chiang Mai close to the centre of activities. It will also get you a Bangkok-area condominium, though not likely near the city’s busy subway system. And with around THB2.5 million to spend, you can look at a two-bedroom bungalow in a community development in the hills around Hua Hin.
Dh500,000
If living close to the centre of Bangkok interests you, then a 1-bedroom condominium close to a subway station is within reach. With more than THB4 million to spend, you can look at owning a three-bedroom newly built bungalow with its own swimming pool close to Hua Hin or on the outskirts of Chiang Mai. A studio or small condominium in Koh Samui or Phuket might interest you too, with the possibility of rental returns on your investment.
Dh1,000,000
With more than THB8 million, you might consider a two-bedroom condominium with sea views overlooking the Gulf of Thailand from properties in Pattaya or Hua Hin, or a modern 1-bedrrom condominium overlooking the Andaman Sea from your new home of Phuket. You’ll have your pick of Bangkok properties close to the subway and centre of the city, or can opt for a 3-bedroom villa, with western-style kitchen, your own swimming pool and car port in Chiang Mai or conveniently located to Hua Hin. The island of Koh Samui too awaits, in a 2-bedroom villa or 1-bedroom condominium close to beaches.
Dh2,000,000
THB17,000,000 goes a long way to opening most but the high-end luxury properties in the Thai market. Phuket living in a three-bedroom villa with a pool close to amenities but far away to be able to soak up the sun and quiet too. You’ll have your pick of high-end condominiums in Pattaya and Hua Hin, or opt for a modern 3-bedroom villa with a pool and landscaped gardens close to the sea or set in the hills.
Do Thai banks assist foreign buyers investing in property?
The short answer is yes – though it is a difficult and expensive proposition. Over the past decade Thai banks such as Bangkok Bank and UOB had provided a limited range of mortgage products. The options are, however, still very limited and there are less favourable conditions placed on foreigners. If you’re intent on using Thai financing, you will have a lower loan-to-value option and pay higher interest rates for a term that is much shorter than offered to Thai borrowers. Realistically, it’s not an easy, cheap or realistic option. Thais will be paying around the 4 per cent mark, foreigners face a rate of 12 per cent on mortgages. But you can always contact the banks directly if you want to pursue this avenue.
The process of buying property in Thailand:
1) In essence, you’re buying the building and leasing the land – and must register the land lease with the Land Office. Headquatered in Bangkok, there are 16 separate offices in the city region and most major cities or larger towns have a local branch. The leases are renewable every 30 years.
2) Another option is to set up a private limited company with mixed Thai and foreign ownership, the foreign ownership being 49 per cent or less – companies are allowed to own land.
Non-nationals can control the company by using a legal power of attorney from the Thai shareholders, handing control to the foreign directors, or through assigning greater voting rights to the foreigner partner’s.
This is an effective and time-tested route, most commonly taken by foreigners. The help of a lawyer is obviously very important.
3) Foreigners can also invest at least THB40 million (Dh4.8 million) in a Board of Investment approved project. These projects must follow the procedures approved by the government agency – for more details visit www.boi.go.th. They will then be allowed to purchase up to 1,600 square meters of land.
4) It’s not as complex when it comes to buying a condominium. Non-residents can buy condominium units as long as no more than 40 per cent are owned by non-residents. However, a foreigner can buy a whole building, minus the land on which it is built.
Don’t get confused by the paperwork involved:
• It is very important to hire a real estate attorney when purchasing property as the property industry in the country is still largely unregulated. A good lawyer will be able to provide more security than a mere real estate agent.
• The Thai legal system is unforgiving, and great care needs to be taken with ensuring that any monies to Thailand are clearly designated for property purchase on all legal forms – and that the correct forms are used and properly filled in.
Due diligence should be conducted prior to signing agreements and paying deposits. It is wise to ask the lawyer to do a caveat search and verify the property’s actual condition before engaging in purchase transactions. Once the seller accepts the offer, his lawyer will prepare a purchase agreement. This should include, among other things, which party pays the legal fees, transfer fees, and taxes.
• Due diligence should be conducted prior to signing agreements and paying deposits. It is wise to ask the lawyer to do a caveat search and verify the property’s actual condition before engaging in purchase transactions. Once the seller accepts the offer, his lawyer will prepare a purchase agreement. This should include, among other things, which party pays the legal fees, transfer fees, and taxes.
• A deposit of 10 per cent will be paid upon signing but the use of escrow accounts are still rare (escrow generally refers to money held by a third party on behalf of transacting parties, such as a mortgage lender). Furthermore, deposits are non-refundable unless it is the seller who backs out. In that case, he will need to pay you double the amount for damages.
How long does it take to close a contract?
Closing usually takes 30 to 60 days later and includes the exchange of contracts and settlement of the remaining balance. When these have been accomplished, the title deeds will be submitted to the Land Department for registration and payment of government duties.
Fees, taxes and duties
1) A transfer fee is levied at a flat rate of 2 per cent on the agreed purchase price though it has been reduced until December 2020 to 1 per cent on properties valued below THB3,000,000.
2) A withholding tax is levied at 1 per cent of the declared amount or the assessed value of the property, whichever is higher.
3) Stamp Duty is 0.5 per cent of the declared amount or the assessed value of the property, whichever is higher.
A transfer fee is levied at a flat rate of 2 per cent on the agreed purchase price though it has been reduced until December 2020 to 1 per cent on properties valued below THB3,000,000.
4) There’s also a registration fee of around 2 per cent of the declared amount or the assessed value of the property, whichever is higher.
5) Then there’s a Special Business Tax levied at around 3.30 per cent of the property value. It is imposed on sale of immovable properties in lieu of VAT.
6) And there’s also Municipal Tax, at 10 per cent of Special Business Tax added on as well.
7) Legal fees are negotiable.
What can go wrong?
There’s nothing easy about buying property in Thailand. Title deeds, for example, can be problematic, and it is important to distinguish between the different types and familiarise yourself with them before engaging in purchase transactions.
1) The best landed property titles are “Chanott ti din” (true title deeds) with land accurately surveyed, giving incontestable possession of the land. The most developed areas of provinces have such titles. However most of Thailand does not, and even in Phuket, for example, only 10 per cent of the land is under this title.
2) Most titles in the country are “Nor Sor Sam” or “Nor Sor Sam Kor” (land explorational testimonial deeds) – land title deeds in as much as clear records of ownership are maintained, and may be sold or leased, but tend to be less accurately surveyed than Chanott titles.
The best landed property titles are “Chanott ti din” (true title deeds) with land accurately surveyed, giving incontestable possession of the land. The most developed areas of provinces have such titles. However most of Thailand does not, and even in Phuket, for example, only 10 per cent of the land is under this title.
3) If you’re buying Nor Sor Sam-titled land lacking clearly defined physical boundaries, it is wise to ask the owner of the listed property to stake out the boundaries, and then ask neighbouring landowners to confirm his work.
4) Sor Kor Nung, Tor Bor Tor Hoc, and Tor Bor Tor Ha (categories of non-transferable deeds) titles are essentially squatter’s rights registered at the district office for a small fee. They cannot legally be sold, nor can the purchaser build on the land.
5) Finally, Sor Bor Kor (non-transferable for development) are true title deeds, accurately surveyed and pegged – like a Chanott – that can be mortgaged and developed. They cannot, however, be leased, sold or transferred and should be ignored.
6) Aside from landed titles, there are condominium (apartments) titles. Established under the Condominium Act of 1979, this is a title to a part of a building or buildings with multiple owners, and a fractional interest in the land – always a Chanott (true title deed) – and other common assets such as a swimming pool and common parts of the building.
The title will state the floor area of the private apartment, the ground area of the common land and the percentage interest which that apartment has in the common property. This percentage also represents the value of the voting interest in the condominium company or owners’ association.
Renting out your property?
Thailand is one of the world’s most visiting destinations and, as such, there’s always a demand for rental properties. If you’re interested in pursuing this, contact a local real estate office who can perform background checks on perspective tenants, look after the paperwork and collect rents or look after scheduled maintenance. If you go this route, you’ll likely lose about 10 per cent of your potential rental income.
If you want to go the short-term rental route, you’ll need to find someone who can turn your property around for new arrivals and keep an eye on things. And there are ample websites that can look after bookings online – and all will charge a set nighty fee or a booking surcharge and administrative costs.
What you need to know:
According to recent Bloomberg news, there’s a glut of condominiums in the Bangkok market, with some 65,000 new apartments added to the city last year. Demand, however, is tepid with developers reporting take-up rates of just 55 per cent and average asking prices decreasing 6 per cent year-on-year.
It is, however, an opportunity to get into the market as home builders look to clear excess stock at lower prices.
Thailand’s Finance Ministry cut its economic growth forecast last month, predicting the slowest expansion in three years as the country grapples with moderating exports and heightened political risk after disputed elections.
The Southeast Asian nation’s capital is also being impacted by a drop in Chinese visitors. Chinese investors have historically made up the bulk of foreign property buyers in Thailand but their presence has waned as China’s economy slows and capital controls limit outflows.
And it isn’t just Bangkok that’s hurting. A total of 454,814 residential units across the country were left unsold in 2018. This might be an opportunity to find a deal.