Q&A on investing in Bangkok

Part 1

After the prolonged political unrest in late 2013 that led to the military coup in 2014, the property market is set for a rebound as the country prepares itself for the next elected government. Many are optimistic that the economy and business confidence will gain positive momentum.

The progressive completion of mega infrastructural projects like mass transit train expansion and road expansion and tunnel constructions will see the property prices in the surrounding area appreciate.

The various economic indicators has pointed to a bullish property market for Bangkok. We spoke to Chewathai Ltd to find out more.

Property Investment in Thailand is a relatively new territory for Bruneians. What are the rules and regulations that oversea investors need to be aware of?
A. Foreigners can only buy condominium units, not land plots or landed properties.

B. According to Thai Law, foreigners may own 49 percent of the aggregate saleable area of a condominium building while the remaining 51 percent must be owned by either Thai nationals or majority owned Thai Companies.

C. Most Thai condominiums are free-hold. Lease-hold properties are not very popular in Thailand unless the location is highly desirable.

D. Foreigners can rent out their condominium units. All rental income is subject to income taxes in Thailand and may be subject to tax in the owner’s own tax jurisdiction.

E. Investors should only buy developments with approved EIA permit. EIA is Environmental Impact Assessment and is the most important permit. Developers can only start construction with an approved EIA permit. Some developers pre-sell their products during the EIA application stage and it is not uncommon that construction is delayed or a project is cancelled due to complications during the EIA application process. The application process is tedious and developers have to defend environmental concerns to the EIA committee. Such concerns include impact on neighbours, environment, waste and waste water management and treatment, impact on cultural matters, amount of greenery, functions and facilities for condominium residents, etc. It usually takes more than 8 months from EIA preparation to approval.

F. Very few banks provide housing loans to foreigners. Currently, only UOB Thailand and ICBC Thailand provide housing loans to select nationalities. However, the interest rates are considerably high – about 5 to 7% p.a., as compared to housing loan rates of 2-5% offered to Thai nationals.

G. Capital gain taxes and other duties are as follows on resale:

i) Land registration (transfer fee) of 2.0% of assessed value of the condominium.

ii) Income Tax which is calculated based on a very complex formula according to 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. This is sometimes called the with-holding tax.

iii) If ownership is > 5 years – Stamp Duty/Fee of 0.5% of the assessed value or the sale price – whichever is higher. If ownership is < 5 years – Specific Business Tax of 3.3% of the assessed value or the sale price – whichever is higher

H. There is no need to be physically present during the entire purchase or sale process and land title deed transfer process. All can be done by authorizing the developer or agent.

I. Investors should look for fully furnished units to avoid the hassle of furbishing the units for rent. It is also cheaper and saves a lot of time.

J. Thailand has very strict money transfer laws. The Bank of Thailand requires you to report the purpose of all foreign currency transfers. This is especially important if there is a need to repatriate the same funds out of Thailand.

Tell us about the price expectation of the property market in Bangkok?
Bangkok property prices have been rising moderately over the past 10 years, and this upward trend is expected to continue for the next 5-10 years, mainly due to the progressive completion of mega infrastructural projects like mass transit train expansion and road expansion and tunnel constructions. Land prices near these mass transit routes have increased more than 2-3 times in the past 3 years. Construction of these infrastructural projects will continue into the next 8-10 years, further supporting growth in the property industry.

Disclaimer : This document is prepared by Chewathai Ltd for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change, and Chewathai Ltd makes no representation as to its truth, accuracy or completeness, and accordingly cannot be held responsible for liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.


Part 2

There has never been a better time to think about investing in property in Bangkok. This city offers potentially lucrative property investment opportunities. In this issue we continue to answer a few frequently asked questions about this market. We spoke to Chewathai Ltd to find out more.

Where are the key places in Bangkok to consider investing in?
This depends on objective and budget of the buyer. Bangkok is a sprawling metropolis and has pockets of business, residential and hospitality areas spread out with overlapping boundaries. High-end areas include Ratchaprasong, Sathorn Rd, Silom Rd, Surawong Rd, select areas of Sukhumvit Rd* and Saladaeng Rd. New Condominiums in these areas can cost up to USD 10,000 per sqm. If prices are too high, investors may not necessary enjoy good rental yields because the rental market for high-end condominiums is competitive and demand is weak. However, investors can expect good capital gains for good products in these prime areas. For good and stable rental yield and moderate capital gains, investors should go for moderately priced condominiums in less prime areas. These areas are usually densely populated residential areas where the middle class populace resides. New condominiums in these areas cost from USD 2,000 to USD 5,000 per sqm. Examples are Lad Prao, Ramkhamhaeng, Ratchada, Chatukchak, Petchakasem and Sukhumvit Rd. *Sukhumvit is a very long road leading from central area to Pattaya, Chonburi to the Cambodian border. The high-end areas are in central Bangkok and include subareas like Chidlom, Nana, Asooke, Emprium, Thong Lor, Ekkamai. Further from city centers are residential areas like Prakanong, Udomsuk, Bangna and Bearing.

What type of property can foreigners buy?
Generally, foreigners cannot buy land or landed properties. Foreigners can only buy condominium units in Thailand subject to the following:

According to Thai Law, foreigners may own 49 percent of the aggregate saleable unit space of a condominium building while the remaining 51 percent must be owned by either Thai nationals or majority owned Thai Companies. For foreigners to be eligible to purchase a condominium unit in Thailand they must present proof to the Department of Land that the funds have been remitted from overseas in foreign currency. Without such proof, the Department of Land will not register the transfer of ownership to the foreign buyer.

Give us a summary of the condominium market in Bangkok.
What is the history? What is happening now? What are the future prospects? Bangkok is the political and commercial capital of Thailand.
As many as 10 million people live in Bangkok and Greater Bangkok. More than half of these come from other provinces and have settled in Bangkok for work. A large proportion of Bangkok residents live in rented apartments. As the standard of living has risen, there has been a clear trend that Bangkokians either purchase their own condominium units, or leave the old apartments and rent newer, modern condominium units.

Thailand is a big country and most Thais would still prefer to live in landed properties like houses or townhouses. However, as land prices increase due to more improvements in infrastructural facilities, landed property prices have also increased. The lower and middle class will find it hard to afford landed properties, except those located far away from central Bangkok. Traffic conditions are also a major consideration. City condominiums therefore provide a more affordable and attractive alternative. The last 10 years has seen the condominium market expanding tremendously. Many new projects were launched and there has been a constant demand to buy or rent condominium units, especially those located near major transit stations. As the market grows, buyers and tenants have become more sophisticated and this leads to developers becoming innovative and meticulous in the design and functions of condominium products. With more products coming into the market, market observers have noticed a slowdown in take-up rates, but the demand is still steady. Location, design and functionality have become very important considerations for both developers and buyers. However, condominium prices are still steadily increasing and are expected to continue this trend in the midterm future.

Although there have been temporary setbacks in the property market due to political developments and even natural disasters like the Great Floods in 2011, the property market only slowed down for short periods but prices held on, and continued to climb each time after each of these subsided. The overall Thai economy is now seeing an improvement after the prolonged political unrest in late 2013 that led to the military coup in 2014. As the country prepares itself for the next elected government, many are optimistic that the economy and business confidence will rebound.

Disclaimer : This document is prepared by Chewathai Ltd for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change, and Chewathai Ltd makes no representation as to its truth, accuracy or completeness, and accordingly cannot be held responsible for liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.


Part 1 was published in the April 2015 issue of Inspire Living Magazine. Download it here!

Part 2 was published in the May 2015 issue of Inspire Living Magazine. Download it here!

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