Residential Market

Signs of improvement lead to launch of new projects
The Nation March 4, 2009

Developers report more site visitors, increasing presales

The top 10 property developers in the Thai market are preparing to launch new residential projects worth more than Bt30 billion as they glimpse what some believe are the first signs of improvement in home-buyer confidence.

A survey by The Nation last week found that Sansiri will launch 11 new residential projects with a market value of Bt15 billion.

One has been launched already and another 10 will follow this week. Preuksa Real Estate plans to launch eight new residential projects worth Bt5.9 billion this month, LPN Development will launch the second phase of a condominium project at Ram-Indra-Laksi worth Bt850 million this week, and Land & Houses plans to launch three new residential projects worth Bt3 billion this month.

Asian Property Development will launch only one project worth Bt660 million this month, but that is the first part of an 11-project campaign for later in the year that will have an ultimate value of Bt17.7 billion. Supalai launched its first condominium project, with a market value of Bt1.7 billion, last month.

Other property firms that are not listed on the Stock Exchange of Thailand are also joining the rash of residential project launches with developments collectively worth more than Bt5 billion. These include Pace Development, which launched a luxury condominium project, Saladaeng Residences, worth Bt2.5 billion, last month. Four Pattana will also launch Baan Busaba, worth Bt200 million, this week.

Sansiri's chairman Apichart Chutrakul said that although Thailand's economy had slumped following the global downturn, his company believed that demand still existed for residential projects priced between Bt3 million and more than Bt5 million.

"I think this is a good time for home-buyers to be buying a residence - when most property developers have launched marketing campaigns to boost their sales in the first quarter," he said.

Sansiri is aiming for presales of residential properties worth Bt5.5 billion before the end of this month, following presale bookings of residences worth Bt2.5 billion after the January launch of its luxury condominium, Quattro.

It will boost its chances of meeting the target by launching Living in Style 2009, at Siam Paragon this weekend.

Supalai's deputy managing director Atip Bichanond said his company believed that despite the economic slowdown, real demand for residential projects priced between Bt1 million and Bt3 million would continue to grow if the projects were designed to meet customers' needs.

"We've seen good signs in the first two months of this year. The number of visitors to our residential projects has increased about 10 per cent since the last quarter of last year, when the number of visitors fell more than 50 per cent below normal. As a result, we believe that when we launch new projects at this time, we will create a feeling of confidence among our customers and in the overall property market, that things are better than in the last quarter of last year," he said.

It's a feeling with which others in the industry concur. Preuksa Real Estate's chief executive and managing director Thongma Vijitpongpun said that in the first two months of 2009, the property market had shown significant recovery from the fourth quarter of 2008, thanks to the government's stimulus measures.

Thongma said his company had recorded presales of properties worth Bt955 million in January 2009, up by 19 per cent over the value of Bt800 million in December. The presales pace increased last month, with customers signing up for properties worth Bt1.3 billion, a 38-per-cent increase over January. This shows that home-buyers' confidence is recovering, Thongma said.

"In December, we had 2,500 visitors to our projects, and between 22 and 23 per cent of them made a decision to buy. Now, we're getting between 3,000 and 3,500 visitors to our projects per month, and between 25 and 26 per cent of them are deciding to buy. This is a good sign for the property market after the hard time in December last year," he said.

Pace Development's chief executive Sorapot Techakraisri said that although the economy would grow only slightly this year, the company believed it was a good time for investors to be getting into residential property.

"If investors save their money in the bank or invest it on the Stock Exchange of Thailand, they will get returns on investment lower than 5 per cent. But when they invest in property, they will get an asset that will generate an annual return on investment of between 7 and 10 per cent. This is better than other investment options," he said. Saladaeng Residences is the company's second condominium project. The first was successfully developed on Sukhumvit 44/1 in 2004.

According to a survey by the Agency for Real Estate Affairs (Area), there were 14 new residential projects launched in January with a total market value of Bt17.25 billion. That showed an increase of 113 per cent over the Bt9-billion value of new projects launched in December.

The research showed that new projects launched in January focused on the middle-income market, with prices between Bt2 million and Bt3 million per unit.

Eastern Seaboard Dynamism Drives Pattaya Property

Why invest in Pattaya?

Dynamic Economic growth along Thailand's Eastern Seaboard is fueling the luxury property market in Pattaya and driving its development as a high-end lifestyle destination. As the city's economic fortunes rise, so too does the demand for top quality accommodation and facilities, and this has attracted the attention of property investors seeking solid long-term returns as well as many of Thailand's property development leaders.

The world-class construction conglomerate Bouygues recently opened an office in Pattaya, the company's first move outside of Bangkok, demonstrating its confidence in the Eastern Seaboard and its future potential for further growth.

The Chon Buri and Rayong areas have a gross domestic product that is climbing faster than in any other region in Thailand. According to the National Economic and Social Development Board, in 2006 the eastern region was the second wealthiest after Bangkok and its vicinity, with a 12% annual growth rate from 2005.

Rayong led the Eastern Seaboard's annual Gross Provincial Product with 527,366 million baht (an interest of 18% year-on-year), followed by Chon Buri with 407,364 million baht (an increase of 9% year-on-year).

This has given rise to a substantial middle class and established a platform for strong long-term gains, creating a fertile ground for property investors looking to secure lucrative long-term rental agreements for their Pattaya portfolios.

Rental demand in Pattaya is being driven by people with business interests in the area or those who work for internationak companies that are establishing bases on the Eastern Seaboard.

These companies all have management who need somewhere to live, and this not only generates potential renters but also a large pool of potential buyers with a number of options. They can live in Pattaya for the lifestyle, sell their investment at a higher price or achive solid rental rates for it.

Rental yields have been averaging 6-10% per year with monthly rates between 500 baht and 650 baht square metre (psm), while investment are returning sustainable capital gains. Northshore, the first project in Pattaya has seen values soar by 70-80%, and it also demonstrates where Pattaya is headed and where I believe it will continue to go.

The speed of capital appreciation has been staggering, especially when talk of achieving 75,000 baht per square meter was considered unrealistic in 2005. In 2007, Northshore achieve a high of 132,500 baht, although a resale occured in January 2008 for a seafront unit that reached 180,000 baht spm.

The reason for the skyrocketing rates is largely due to a very limited supply of existing high quality condominiums. Prices are set to rise and no more than 1,000 to 1,200 units that have currently broken ground will be completed over the next three years.

The emergence of the Eastern Seaboard as Thailand's most economically energetic region has also brought a more demanding landscape for developers in which investors need to be wowed by high-quality standards in construction, design and finishes.

Pattaya is among the first region's outside of Bangkok that is seeing new high levels of construction, as evidenced by Bouygues local subsidiary Bouygues-Thai's new operation. The company is overseeing the building of Raimond Land's 374-unit Northpoint in north Pattaya.

From a design point of view, much of what is available is form over function stressing aesthetics rather than effective, practical design. However, high-end investors are looking for functionality in a modern design and many developers are responding accordingly.

Along with the rise in the quality of residential construction, the are's economic boom is lifting standards across the board in Pattaya as it develops into a destination that can cater to affluent, well-travelled visitors.

All indicators point to continued sustainable economic growth on Thailand's Eastern Seaboard, and the region's ongoing rise prominence will be met by continued demand for high-quality residential properties, presenting an excellent opportunity for savvy investors seeking strong rental yeilds and impressive capital gains.

Property Laws in Thailand

Can I own a Condominium in Thailand?
Buying a condominium is perhaps the simplest and easiest option available for foreigners. The only restrictions on purchasing a condominium, are that the percentage of units sold to foreigners cannot exceed forty nice percent of the total number of units in the condominium block; and that the funds used to buy the condominium have been remitted from abroad and correctly recorded as such by a Thai Bank on a Tor Tor Sam. Purchases of condominiums by foreigner individuals come under the jurisdiction of the CONDOMINIUM ACT (No. 3) B.E. 2542 (1999).

The owner of each condominium is issued with a certificate of unit ownership. The certificate also has a statement saying exactly what percentage of rights over the common areas of the building each owner has.

Can I own a house and land in Thailand?
Ownership of land is governed by the Land Code B.E. 2497 (1954), the Civil and Commercial Code, Land Reform for Agriculture Act B.E. 2518 (1975) and the regulations set forth by the Ministry of the Interior. Under Thai law, any person can register any type of building in their own name, therefore a foreigner can own a structure (for example a house) erected on the land and may register such ownership (with proof) at the Amphur (local district) Land Office. Certainty of possession of land and house is assured by being the owner of the house. If arranged in this manner, then the house will be separate from the land, and will not be a component part under Civil Law.

Ownership of land by foreigners, on the other hand, is a totally different story, and is highly restricted in the Kingdom of Thailand. Having said that, it isn't impossible for a foreigner to own freehold land, provided they abide by strict rules and fall within certain conditions, viz:

1. Become a Thai resident/citizen

2. Receive an inheritance as a statutory heir under section 93 of the Land Code, in this instance, the total area including the land which has already been acquired (or has not yet been acquired) shall not exceed that specified in section 87 of the Land Code, i.e. not more than 1 rai (1,600 sqm.) for a residential purpose.

3. Bring the money into the Kingdom for investment to the amount as prescribed in the Ministerial Regulation, which shall be not less than Baht forty million. In this instance, the land to be acquired must be for a residential purpose and must be of not more than 1 rai (1,600 sqm.) in area, provided also that permission must be obtained from the Minister. Under section 96 bis of the Land Code, the application for such acquisition of land shall be in accordance with rules, procedures and conditions prescribed in the Ministerial Regulation.

4. Apply for acquisition of land under other laws such as the Promotion of Investment Act, B.E. 2520 (1977), the Industrial Estate Authority of Thailand Act, B.E. 2522 (1979), the Petroleum Act, B.E. 2514 (1971). Detailed Information regarding the Promotion of Investment Act and the Industrial Estate Authority of Thailand Act can be obtained from the Board of Investment (BOI) at tel: +662-537-8111 and from the Industrial Estate Authority of Thailand at tel: +662-253-0561 respectively. (More Information)

5. 30 Year Lease with Options-you can have a 30 year lease with a prepaid option to renew for a further two periods of 30 years each. The foreigner may also be given the option to purchase the land should the law in respect of foreign ownership of land change in the future. In order to be enforceable, any lease for a period of longer than three years must be registered, which involves payment of a registration fee and stamp duty based on a percentage of the rental fee for the whole lease term. The original registered lease remains in force and effect even if the property is sold.

The drawbacks to a lease include the fact that the parties can contractually agree to renewals, but this right cannot be registered and is not effective against a purchaser of the property, and that the lessee cannot (without the lessor's consent) sublease, sell or transfer his or her interest.

6. Usufruct Interest (Sitthi-kep-kin) - gives you temporary ownership rights to things on or arising from the land. In practice, a usufruct is limited to 30 year maximum period; like leases, the agreement can be successively renewed. In contrast to a lease, a usufruct interest can be sold or transferred, although it is expires upon the death of the holder of the usufruct and therefore cannot be inherited.

7. Limited Liability Company - this form of purchasing property is the most popular with foreign investors as the Articles of Association can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the Alien Business Law. That law requires that 51% of the shares be held by Thai juristic persons, however, any company with more than 40%foreign interest that purchase land will be investigated by the Central Land Office in Bangkok (under section 74 of the Land Code) to ensure that the company has not been organized in an attempt to circumvent the prohibition against foreign ownership of land. This results in the foreign ownership of the company being limited at 39%, but with changes to the Articles of Association, the use of the two tiered stocks (i.e. Ordinary Shares and Preferred Shares with different voting rights), plus the foreigner being the only director of the company who can commit or bind the company in any contractual dealings - it is possible to effectively give the minority shareholder control over the company.

When purchasing property in Thailand, it is important to abide by the rules and regulations in order to protect the interests of both the Buyer and Seller. It is highly advisable to use Escrow Agreements when buying or selling property in Thailand - an Escrow Agreement will offer protection and assurance to both the Buyer and Seller.

What is a Tor Tor Sam (3)?
A Tor Tor Sam (3) is an official bank document issued by the receiving bank upon the receipt of foreign currency into your bank account in Thailand. You must request a Tor Tor Sam from your bank when you are remitting funds to Thailand for the purpose of purchasing a condominium, and the Tor Tor Sam must specify that the remittance is solely for the purpose of purchasing a property - Code 5.22.

Do they have Title Deeds in Thailand?
There are broadly four types of Land Title in Thailand that are used as common evidence of land ownership, possessory rights and other interests in Thailand.

I. Chanote (Title Deed)
A Chanote is a certificate for ownership of land. A person having their name shown on the deed has the legal right to the land, and can use it as evidence to confirm the right to government authorities.

The title deed has been issued by using GPS to set the area and boundaries of the land, which is very accurate method. It is the long term goal pf the Land Department that all land in Thailand will be covered under the Chanote title system. This is the most secure type of land title and is highly recommended.

II. Nor Sor Sam Kor (confirmed Certificate of Use)
This certifies that the person named on the certificate has the confirmed right to use the land, implying all requirements for the issuance of the deed is pending. They may be sold, leased, used as mortgage collateral and etc. The holder of this certificate cannot leave the land unattended for more than 12 years.

III. Nor Sor Sam (Certificate of Use)
Similar to the above Confirmed Certificate of Use except that not all of the formalities to certify the right to use have been performed. Before a transfer can be made, a notice of intent must be posted and then 30 days public notice is necessary before any change of status over the land can be registered.

IV. Sor Kor Nung (Certificate of Possession)
This recognizes that a person is in possession of land but the Certificate does not imply that there are any rights associated with the possession. It is not transferable , but a person in possession may transfer physical possession and the new possessor may apply for a new Certificate of Possession.

Ask to see a copy of the front and back of the land or condo title deed. A faithful translation of this will show you who the current owner is; if the property has any endorsements or liens; the shape, area and orientation of the property and border to a public property (such as a road, stream or the ocean).

Can I get a Mortgage Loan?
Foreigners generally cannot mortgage properties in Thailand, however, most of the financial institutions in Thailand provide loans for real estate purchasing to Thais and Thai companies. It is common for a real estate developer to arrange for his customers to have a financing package from a financial institution. In most real estate development projects, a down payment can be made in installments from 10 to 24 months. After the down payment has been paid, the sale contract will be made and the balance amount is paid through the loan which is financed from a financial institution. The financial institution requires you to mortgage the property with it as collateral against the loan.

Land Appraisals and Valuations
Finding the exact appraisal price for land is difficult, since there are generally three different appraisal rates; the government rate, the appraisal company's rate and the rate which is considered to be fair market value of the land. Over the last few years all of these rates have begun to come closer together.

What Should I Look for in a Property?
Whether you are considering renting, leasing or purchasing property there are several infrastructure and other considerations which must be taken into account:

1. Location - Roads, proximity and access to business, shops, hospitals and etc.

2. Telephones - Access to direct lines and IDD facilities

3. Water - Main water and supplementary storage facilities.

4. Electricity - Mains connection, and backup generators for condominium blocks.

5. Security - 24 hours security service, door and window locks.

6. Cable or Satellite TV connection.

7. Pest Control - localized spraying and flywire screens on windows.

8. Hot water facilities - nearby all in Thailand are instant and not storage.

9. Air Conditioning - a necessity in Thailand.

10. White Goods - Refrigerators and Washing Machines.

My Wife is a Thai National, Can She Own Land?
Prior to 1998, any Thai woman who married a foreigner would lose her right to purchase land in Thailand. She could, however, still retain land that she owned prior to marrying the foreigner. However, the recent (1999) Ministerial regulation now allows Thai National's married to foreigners the right to purchase land, but the Thai spouse must prove that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it. This is usually achieved by the foreign spouse signing a declaration stating that the funds used for the purchase of property to the marriage and are beyond his claim.

Are There Property Taxes in Thailand?
There are no property taxes as such in Thailand that are exactly equivalent to the property taxes in the west, however, the most comparable taxes on properties in Thailand are the Land Tax. The Land Tax levied on land is so minuscule, that in practice the body charged to collect it, rarely bothers to do so, and if they do, they usually wait several years until the amount accumulates. The second tax, the Structures Usage Tax, relates to buildings, is collected by the municipal office or district office, and is only applied to properties used for commercial purpose.

What Taxes and Costs are Applicable to Purchasing a Property?
Whenever a property in Thailand is bought and sold, there are four taxes that need to be taken into account (many buyers, especially foreigners, fail to take these into account). Unfortunately, in December 2003, the Cabinet issued a resolution relating to tax issues, and from 1 January 2004 onwards, specific business tax, which is imposed on the sale of immovable property, will return to the original 3.3 percent rate as a result of the recovery of the property sector. In 2001, the government reduced the property tax to 0.11 percent to stimulate the property sector. Similarly, the transfer fee will also return to the normal rate of 2 percent instead of the reduced rate of .01 percent

1. Land registration (transfer fee) of 2.0% of assessed value of the land.

2. Stamp Duty/Fee of 0.5% of the assessed value or the sale price whichever is higher.

3. Specific Business Tax of 3.3% of the assessed value or the sale price whichever is higher- this will be applied to all sales by companies and to any private sales that occur within 5 years of the date of purchase.

4. Income Tax - this is calculated on a very complex formula based on the assessed value of the property, the length of time owned and the applicable personal income tax rate. In practice, this will work out to under 2% of the price for low to medium value properties, and up to 3% for higher value properties.

Because of the local system of taxing property on an arbitrart assessed value as determined by the Land Department, rather than true market value, these taxes could amount to a considerable percentage of the purchase price.

Therefore, if you haven't detrmined during the negotiation that the seller will pay the taxes upon transger, you could get nasty shock when a tax bill arrives often some two or three months after the sale is completed. As in all business transactions anywhere, ceveat emptor (let the buyer beware) rules. There are no set rules on who pays for which taxes and it is just another part of the bargaining process make sure you discuss it with the agent and your own lawyer.

Pattaya is popular for investors

Backed by thriving economy and a populace brimming with retirees, tourists, expatriates and prosperous businessmen, Pattaya is fast turning the heads of savvy investors looking for handsome returns in a beach destination.

Pattaya continues to attract astute property investors, who believe today's market conditions offer the opportunity to lock into excellent future returns, either from rental income or through capital growth.

The year 2004 signaled the rebirth of Pattaya's real estate sector. Prior to this, few high quality apartments had been completed.

Continued growth in new housing construction permits since 2004, which grew to the 3.9 million square meters approved in 2006, indicates a healthy property market. Of note is the percentage of permits issued for high-rise residential construction, which tripled from 7% in 2004 to 21% in 2006. A high-rise building is recognized as being more than eight stories high.

The successful launch of Raimond Land's Northshore project in 2004 triggered a wave of upmarket beachfront high-rise development including La Royale (2005), Ocean Portofino (2005), The Sails (2006), Northpoint (2006), and The Spinnaker (2007). A total of 1,000 new high-end beachfront condominium units are expected to be completed over the next three years.

Premium grade A condominium projects have joined beachfront developments in popularity, bringing the number launched between 2004 and 2007 to 31 sites for a total of 5,177 units.

The number of units launched per year has also climbed, with 2,268 new units announced in 2007. Pattaya itself received 33% of the newly launched units, with 11% and 22% in North and Central Pattaya respectively.

The Jomtien area attracted 26% of the new launches, with 2% in Jomtien itself and 24% in Na Jomtien. Interestingly, 41% of new launches were located outside of the Pattaya and Jomtien areas, with growing interest for Si Racha and nearby Rayong.

Condominiums are popular among international investors as they are more affordable and the only type of property in Thailand that a foreigner can own 100% freehold. Security and maintenance issues are handled by common area management, adding to the confidence in a holiday home investment.

Most foreigner property buyers are British, American, Australia, and Swedish, a line up that has not changed in recent years and remains a strong base for alien ownership.

Russia recently entered the top five buying nations to demonstrate the emergence of Eastern European investors. Increased interest from China and South Korea is due to the easing of restrictions on fund transfers.

The Germans, French, and Scandinavians are also important buyers, and reflect the increasing trend for Europeans to purchase second homes outside traditional European resort destinations. Many have either relocated to Pattaya, spend the European winter there or live in regional business centers such as Singapore, Hong Kong, and Shanghai.

However, the bottom line for investors in Pattaya's high-end residential property market is solid returns, whether from rental yields or capital gains.

Short-term investors have already cashed in by turning over luxury condominiums during the period of short supply. An example is the 187-unit Northshore, which launched in 2004 and sold out before opening in 2006. By 2005, resales were bringing in returns more than 30% with rates jumping to 40-50% the following year.

Appreciation has been strong. The price record of 119,718 baht per square meter in 2006 jumped 10.7% to 113,479 baht square meter in 2007, and the sale generated a record-setting capital gain of 80%.

Most of the top 10 sa;es in 2006-07 generated capital gains of around 30-50%, with the latest resale occurring last month, achieving 180,000 baht per square meter.

Though the returns may not be as spectacular, low-risk, long-term investments in high-end properties can be profitable. While it may be best to steer clear of developers guaranteeing annual gross rental yields of 10%, this level can certainly be achieved as also exhibited at Northshore, where 6-8% yields are already being realized and future capital gains are expected to be handsome.

A typical rental contract is for 12 months and not by the day, with monthly rates between 500 and 650 baht per square meter. Two main markets feed the rental sector: Pattaya residents who are often North American retirees and foreign executives - mostly Japanese, South Korean, and Malaysian - who work at industrial estates in the area.

Current market conditions and new developments funded by international financial institutions are signaling a wave of opportunities for high-end residential property investors in Pattaya.