Thailand Property Investment Guide
Real estate in Bangkok is on the upsurge and has caught the eye of both local and foreign investors. The sudden interest in buying property in Bangkok is driven by data showing the excellent potential for growth. For many analysts and investors, it is the hottest real estate market in Asia. Here we will look at every aspect of it; from what you need to buy property in Bangkok in 2018 to why it is a good idea to do so and what to expect.
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Bangkok’s Real Estate Market in 2018
The growing economy drives strong demand for real estate not just in Bangkok, but in the entire country as well. The country’s economy grew by 4.3% in Q3 2017, the fastest pace in the last four years. That’s mainly due to rising personal spending and strong export. For this, the national economic and social development board projects growth of 3.9%. That alone sends a pretty solid message to potential investors.
CBRE has also given its prediction about the real estate market. According to them, there will be still a strong demand. At first, it won’t be as aggressive as seen in the years before, but it will be coherent and steady. Their projection is that they won’t see too many speculator interests in the market and that instead, they will see a demand driven by real end-users. That alone should eliminate the danger of another bubble and make a quite stable market.
IMF experts see the country’s demographics as something that is very important before thinking about investing in a particular place. Thailand has the youngest population in the region and at the same time one of the most literate one, it stands at 96.7%. The more educated the population is, the more productive the economy is and as a result, we see higher paying jobs.
There are entire generations of well-educated people with high income that decide to invest in real estate and show no tendency to stop. IMF predicts the demand will grow parallel with the country’s growing economy.
As a result of all that the condominium market in Thailand has continuously been rising through the years, from more than 100,000 units in 2015 (valued roughly at 413 billion baht) to 114,000 units in 2017 (estimated worth 441 billion baht). The expectations for 2018 are that by the end of the year there will be around 120,000 units launched on the market (estimate worth 500 billion baht), half of which will be in Bangkok.
A large number of company headquarters in Bangkok makes this is a huge tenant catchment area. If you are a rental investor landlord, there are a number of property projects currently in development with undoubted prestige, worthy of your investment.
Bangkok Rental Yields
Rental yields are projected to grow from 5% to 8% based on historical data. What’s interesting about the Bangkok rental yields is that for the past three years we see a substantial rise for medium-sized apartments. That’s not typical for other countries where smaller apartments earn the highest rental yields.
For example, 120 sq. m. apartment in Bangkok earns a gross rental yield of 8%, while a smaller 60 sq. m. apartment (central location) gets rental yield circa 5.6%.
Yields for luxury properties have experienced even higher growth. The only decline we have seen lately is only for larger sizes apartments (around 250 sq. m.).
The apartments that were surveyed for this publication are located in upscale areas such as Riverside, Central Lumpini, Rama III, Silom, and Sukhumvit Road.
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Thailand’s Policy on Foreign Real Estate Investors
It is not possible for a foreigner to buy land in Thailand, only apartments, and condominium units. Also, Thailand’s laws allow foreigners to make up just up to 49% of the condominium unit owners. But, foreigners can purchase an entire building. That does not include the land on which the building is built on.
In the last few years, the lawmakers in Thailand did make some changes to make easier for non-residents to invest in the real estate market. As a result, a non-resident can take a 30-year lease that is renewable. Once the lease is registered at the Land Office, it can be renewed indefinitely, in 30 years increments.
Property Purchase Process in Bangkok
The realty estate industry is not so well regulated in Thailand, at least not as it is in most Western countries. Because of that, it is essential to hire a real estate lawyer to guide you through the process.
- Once you have selected a property, you will pay a booking price which will allow you 14 days to pay 10 percent deposit on the property.
- A sales purchase agreement will then be sent to your lawyer usually within 30 days.
- The agreement should be signed with another 10 percent deposit paid to the developer within 30 to 45 days.
- No further payment will be due until the property is completed and transfer of ownership is done at the Lands office.
- Legal Fees are negotiable
- Currency (Transactions are done in the local currency – Thai Baht THB)
- Stamp Duty (2% after TOP)
- Business tax and withholding tax; If sell within 5 years: 3.3% Biz Tax + (5-35%) withholding tax. If sell after 5 years: 0.5% Business Tax + (5-35%) withholding tax.
- Registration fee (Registration fee is around 2% of the declared amount or the assessed value of the property, whichever is higher.)
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Taxation for residents and Taxation for non-residents
- Taxation for resident
Up to 35% of the generated revenues (that’s based on your personal tax rate scale)
- Taxation for non-residents
In a situation of a double tax agreement between Thailand and your county, it is the withholding tax that is turned into a tax credit. In that case, the fee is set a 15%.
Rental Income Tax
This is a tax imposed on rented properties. It is paid once a year at a constant rate of 12.5% of the estimated annual rental value. There is an exemption to this tax for vacant dwellings and those that are owner-occupied.
Landlord and Tenant
Again, this is another segment for which there is no formal regulation; therefore it is pro-landlord. The contract between the two parties, the landlord and tenant prevail. In case of dispute, the landlord holds the higher ground and can call the police to evict the tenants. When renting out the property, you can engage Bangkok agency arm sale rental for a 1 year lease 1 month of commission.
They are subject to free negotiation and typically remain the same during the date listed on the contract. In case of pending rent adjustments, it is the landlord that is obligated by law to notify their tenants in advance. Most times that coincides with the renewal of the contract.
Typically one month is paid in advance, and there is a security deposit equal to up to three months of rent. That’s all prior to occupancy. Deposits are returned (no interest) 30 days after the contract has expired. In case of unpaid bills or repairs, the expense is deducted from the deposits. In case the tenant to terminate the lease before the first year has passed, the deposit is forfeited.
There are even some instances in which the rent for the entire lease is paid in advance.
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Thailand’s Legal system
Most of the disputes are usually settled in court with negotiation. One reason is that courts are a bit slow and the process can be pretty inconvenient for both parties.
The other reason is that there is a lack of tenant protection laws that make court hearings even more complicated. So, all decisions are based on contractual rights that determine the correlations between the landlord and the tenant. Therefore, the terms and conditions stated in the lease determine who is in the right and who is in the wrong. Or, at least how the respected legal representatives interpret them.
Facts about Financing Real Estate Investment in Thailand
In the past, foreigners in Thailand could not borrow money for property buying. However, a lot has changed since those days. Nowadays, that’s possible and considered a positive change, one that can attract foreign investments to help the economy grow even more.
The change is mainly seen with banks that look at foreigners, not like potential risk, but more opportunities. Therefore, almost anyone, under the same condition as the locals can get a mortgage in Thailand.
The most notable example is set by the United Overseas Bank (UOB) which has set up a fund for real estate investments. Once you have made a loan application in Bangkok, UOB will administer the loan from Singapore. The loans can be made in Singapore Dollars, Euros or US Dollars, with rates dependent on the used currency. Typically, the interest rates stay fixed for up to three years.
UOB International Property Loans are available under the following terms:
- UOB offers loan packages for Freehold condos only.
- Loan from UOB Thailand are up to 70% of the purchase price.
- The loan currency is in SGD and USD.
- The loan tenure is from 5 to 30 years.
- The interest rate is around 6 to 7%.
- UOB loan area financed includes Bangkok and selected upcountry areas.
- The minimum annual income should be $100K.
In addition to all that, the applicant can also be asked to submit some of the following documents:
- Copies of ID card, visa page, and passport
- Copies of bank statements
- Confirmation of salary or income
- Copies of unit title deeds
- Copies of purchase contracts and sale.
- Marriage certificate
The interest rates for these types of loan are typically based on a fixed interest rate depending on the bank offer at the time. It is also helpful to note that because these loans are offered locally, the interest rates are usually a bit more competitive.
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Insurance is the best way to be covered in case of some unwanted event. The building owners are responsible for the common area, the external walls, floors, and ceiling in case it is their fault. For everything else, you need to rely on your insurance. That is if you have one. Sometimes, buying one may come as mandatory and part of your buying contract.
The estimated cost of a home insurance policy in Bangkok is around 100 SGD per year. The policy covers all your property, as well as any other property damaged by a fire or other leak that originated from your place.
Every year AGM holds a meeting where the owners discuss whether extra maintenance is needed for the building, repairs, extra security, changing rules, and stuff like that. If the changes are voted, you will be required to pay your part of the bill, same as every other resident there. The estimated maintenance cost is 50 SGD to 200 SGD per month.
As an owner, you will have the right to attend AGM meetings, give proposals, and vote on every proposal. At the same time, you are bound to every decision made at the AGM annual meetings.
In addition to all that as an AGM member, you can also make official complaints that will be discussed at the next meeting and voted on.
Furniture and Decorations
Most new apartments and condos come with furniture and are pre-decorated. However, that doesn’t mean you cannot bring your own or further decorate the place. As a buyer, whichever style of interior decoration you wish to make is at your discretion. You have the freedom to make any changes to the furniture and decorations of your newly acquired property.
The best way to make a solid conclusion is by looking at the hard facts and what they speak. Here are the top hints to how stable the real estate market is:
- The country’s economy is growing and is expected to produce positive results in the foreseeable future.
- The country biggest demographic population is made of young, well-educated, well-paid people that invest heavily in real estate. Thus creating a strong demand on the local market.
- The banks are more and more open to financing real estate investments.
- The country is creating ways for foreign investments in real estate.
- Bangkok has a population of over 8 million and still growing.
- 7 million travel to Bangkok on a daily basis for work
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