Thailand
Last Updated:
May 31, 2010
Thailand, known as Siam until 1939, is the only South East Asian country never to have been colonized by Europeans. We believe that the substantial falls in property prices over the last two years make Thailand an extremely attractive investment, a country to which we give a 4-star investment rating.
There are many opportunities for property investors in Thailand, with 3 main locations that all provide a fully developed infrastructure: Bangkok, Pattaya and Phuket.
There is a wide choice for international investors. There is an estimated overhang of about 1 billion dollar of newly built residential real estate on the market in Pattaya alone. The price range is between around 1 million baht (US$ 30,000) for a new 32 square metre studio in Pattaya, to 120 million baht (US$4 million) for 6 star luxury penthouses at the high end. Rental yields are typically around 8% (Global Property Guide research for Bangkok), but can also reach 10% and higher.
The best time to buy?
Due to the economic and financial crisis which heavily affected Thailand in 2009, plus the serious civil unrest in Bangkok this year, and the beginning of the “low tourist season”, which lasts from May to September each year, many developers are now offering significant discounts on projects, both off-plan as well as ‘ready to move in’.
Trouble in Paradise
Thailand’s tourist industry has around 15 million visitors per year, despite catastrophes like SARS in 2003 and the Tsunami in 2004 and the regular political blowups, including recent violent events in April this year in Bangkok. Thailand, the “Land of Smiles” has a long-tested ability to quickly digest such events. Government continues despite coups, infrastructure gets built, and tourists don’t seem to mind the political unrest as most of the time it doesn’t affect foreigners. Despite the events, Thailand saw a 28% upturn in the last quarter of 2009 with a total spending of about 16 billion dollars during 2009.
Red versus yellow partly represent ‘rich urban’ versus ‘poor rural’, but also represent different elites fighting for control, as suggested by the leadership of nouveau riche ex-Prime Minister turned fugitive Thaksin Shinawatra, who from nothing built a personal fortune of more than 10 billion dollars.
Solid business infrastructure
Thailand has a well-developed business infrastructure, and is a leading exporter of food and natural commodities (rice, fruit, coconut oil, rubber) as well as a low-cost production source for the industries of developed countries, especially Japan. Thailand is South East Asia’s largest producer of cars, and the world’s second largest producer of pickup trucks. The deep sea port in Laem Chabang (between Bangkok and Pattaya) ships thousands of containers of goods worldwide, ranging from automotive to electronics, white goods and health care.
Free trade agreements between Thailand and other Asean countries as well as Australia have helped bring significant inward investments over the last 20 years.
Lifestyle
Living costs are very low and the lifestyle offered can meet the highest standards. Infrastructure like healthcare, shopping, leisure, communications and banking are fully developed – Thailand is certainly the “lifestyle” leader in terms of value for money within South East Asia.
Pattaya and Phuket have become similar to “special economic zones”, with a high number of foreigners and expatriates that have settled here and invested in real estate for their own retirement and for investment.
Real estate regulations
Foreigners cannot own land in Thailand. However Thai law stipulates that only 51% of each property has to be in Thai ownership. Foreigners can thus buy and own apartments in condominium developments in their own name, as long as total foreign ownership does not exceed 49%.
International investors can also set up Thai companies through which they can indirectly own houses and apartments within the ‘Thai’ quota of condominium buildings. As houses are offered at comparably lower cost than apartments and ‘Thai quota’ apartments are usually about 20% cheaper than the ‘foreign’ quota, this has become an interesting avenue for cashflow investors looking for rental yields who have a longer term perspective on ownership.
Although these ‘Thai’ units are harder to resell to foreigners, they offer higher yields, so it’s well worth putting an individual investment plan together to find the best strategy.
Many law firms are specialized in setting up Thai companies for investors for this purpose and investors should seek independent advice to guide their decision making process.
There are many opportunities for property investors in Thailand, with 3 main locations that all provide a fully developed infrastructure: Bangkok, Pattaya and Phuket.
There is a wide choice for international investors. There is an estimated overhang of about 1 billion dollar of newly built residential real estate on the market in Pattaya alone. The price range is between around 1 million baht (US$ 30,000) for a new 32 square metre studio in Pattaya, to 120 million baht (US$4 million) for 6 star luxury penthouses at the high end. Rental yields are typically around 8% (Global Property Guide research for Bangkok), but can also reach 10% and higher.
The best time to buy?
Due to the economic and financial crisis which heavily affected Thailand in 2009, plus the serious civil unrest in Bangkok this year, and the beginning of the “low tourist season”, which lasts from May to September each year, many developers are now offering significant discounts on projects, both off-plan as well as ‘ready to move in’.
Trouble in Paradise
Thailand’s tourist industry has around 15 million visitors per year, despite catastrophes like SARS in 2003 and the Tsunami in 2004 and the regular political blowups, including recent violent events in April this year in Bangkok. Thailand, the “Land of Smiles” has a long-tested ability to quickly digest such events. Government continues despite coups, infrastructure gets built, and tourists don’t seem to mind the political unrest as most of the time it doesn’t affect foreigners. Despite the events, Thailand saw a 28% upturn in the last quarter of 2009 with a total spending of about 16 billion dollars during 2009.
Red versus yellow partly represent ‘rich urban’ versus ‘poor rural’, but also represent different elites fighting for control, as suggested by the leadership of nouveau riche ex-Prime Minister turned fugitive Thaksin Shinawatra, who from nothing built a personal fortune of more than 10 billion dollars.
Solid business infrastructure
Thailand has a well-developed business infrastructure, and is a leading exporter of food and natural commodities (rice, fruit, coconut oil, rubber) as well as a low-cost production source for the industries of developed countries, especially Japan. Thailand is South East Asia’s largest producer of cars, and the world’s second largest producer of pickup trucks. The deep sea port in Laem Chabang (between Bangkok and Pattaya) ships thousands of containers of goods worldwide, ranging from automotive to electronics, white goods and health care.
Free trade agreements between Thailand and other Asean countries as well as Australia have helped bring significant inward investments over the last 20 years.
Lifestyle
Living costs are very low and the lifestyle offered can meet the highest standards. Infrastructure like healthcare, shopping, leisure, communications and banking are fully developed – Thailand is certainly the “lifestyle” leader in terms of value for money within South East Asia.
Pattaya and Phuket have become similar to “special economic zones”, with a high number of foreigners and expatriates that have settled here and invested in real estate for their own retirement and for investment.
Real estate regulations
Foreigners cannot own land in Thailand. However Thai law stipulates that only 51% of each property has to be in Thai ownership. Foreigners can thus buy and own apartments in condominium developments in their own name, as long as total foreign ownership does not exceed 49%.
International investors can also set up Thai companies through which they can indirectly own houses and apartments within the ‘Thai’ quota of condominium buildings. As houses are offered at comparably lower cost than apartments and ‘Thai quota’ apartments are usually about 20% cheaper than the ‘foreign’ quota, this has become an interesting avenue for cashflow investors looking for rental yields who have a longer term perspective on ownership.
Although these ‘Thai’ units are harder to resell to foreigners, they offer higher yields, so it’s well worth putting an individual investment plan together to find the best strategy.
Many law firms are specialized in setting up Thai companies for investors for this purpose and investors should seek independent advice to guide their decision making process.
Analysis of Thailand Residential Property Market »
RENTAL YIELDS
Last Updated: May 25, 2010
Thailand’s strong manufacturing base, combined with its tourist industry, are standing the country in good stead, despite the political crisis. Residential property in Bangkok is worth more in terms of US$ than when we last surveyed the Thai scene. This is largely due to the steady appreciation of the Thai Baht against the US$.
Premier used property in prime districts of Bangkok is worth around US$3,000 per square metre across all price-ranges, and earns yields of 6% to 7.4% for all property sizes, except for the very largest properties. Smaller apartments tend to earn higher yields.
Premier used property in prime districts of Bangkok is worth around US$3,000 per square metre across all price-ranges, and earns yields of 6% to 7.4% for all property sizes, except for the very largest properties. Smaller apartments tend to earn higher yields.
TAXES AND COSTS
Last Updated: Feb 20, 2010
Effective Tax Rate on Rental Income |
|||
| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 6.3% | 12.7% | 15.8% |
| Click here to see a worked example | |||
Source: |
Disclaimer | ||
Rental Income: Non-residents pay tax on income derived from property located in Thailand at progressive rates from 10% to 37%. Gross rent is subject to 15% withholding tax, which can be credited to the actual income tax due.
Property Tax: The House and Land Tax, levied on rental properties, is payable annually at a flat rate of 12.5% of the assessed annual rental value of the property.
Capital Gains: Gains derived from the sale of immovable property are taxed at standard income tax rates.
Inheritance: There are no inheritance or gift taxes in Thailand.
Residents: Residents are taxed on their worldwide income at progressive rates, from 0% to 37%.
Property Tax: The House and Land Tax, levied on rental properties, is payable annually at a flat rate of 12.5% of the assessed annual rental value of the property.
Capital Gains: Gains derived from the sale of immovable property are taxed at standard income tax rates.
Inheritance: There are no inheritance or gift taxes in Thailand.
Residents: Residents are taxed on their worldwide income at progressive rates, from 0% to 37%.
BUYING GUIDE
Last Updated: May 05, 2008
Total round-trip costs are moderate at around 10% to 12.3% of the property value, inclusive of the realtor’s commission of from 3% to 5%. There are complications surrounding the computation of the buying costs; stamp duty and specific business tax are based on the assessed value or declared value, whichever is higher. Buyer and seller each pay for their own separate lawyer.
LANDLORD AND TENANT
Last Updated: Jun 27, 2006
Given the absence of formal legislation, Thailand is pro-landlord.Rent: The contract prevails on issues regarding the rent, rent adjustments, and notices.
Tenant Security: If the tenant refuses to leave after the contract and/or the notice to vacate expires, the police can be called upon to forcibly remove the tenant. However, landlords are not allowed to take abandoned appliances and furniture as compensation for unpaid rent and damages.
ECONOMIC GROWTH
Last Updated: May 31, 2010
Political uncertainties damage weak economy
Thailand is a middle income, constitutional monarchy with a GDP per capita of US$3,940 in 2009. Thailand attracts millions of tourists because of its culture, beaches, cuisine, and heart-warming hospitality. Apart from the metropolitan cities of Bangkok and Chiang Mai and and the beach havens of Pattaya and Phuket, most of the country remains rural.
However, Thailand has remained under a cloud since the restoration of democracy in December 2007, and political tension between pro and anti-Thaksin groups has continued.
The rural majority, who benefited immensely from Thaksin’s pro-poor programs, remained loyal to him. This led to some electoral victories for Thaksin’s allies in Parliament. On the other hand, anti-Thaksin groups include students, blue-collar workers, the urban elite, royalists and military-connected elements. They have been protesting against corruption, and the populist programs of Thaksin and his cronies. The global financial downturn pushed the economy into recession in Q1 2009. GDP contracted by 2.3% in 2009. A minor recovery had been expected in 2010 with 1% GDP growth, but the recent political troubles put this in doubt.
Despite the social divisions revealed by the demonstrations, Thailand does have a long history of overcoming political disturbances. There is no ongoing ‘rebel movement’ (as in the Philippines or India), and ethnic divisions are confined to the Muslim South.
The recent demonstrations were a ‘revolution of rising expectations’. The rural poor are fully aware of the wealth pouring into Bangkok, and want part of it. This is what Thaksin offered, for all his faults. The ‘reds’ however have no genuine ideology, no alternative vision of society, only populism. Therefore while ‘business as usual’ is not politically inspiring, it seems the most likely outcome.
