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First and foremost, real estate in Thailand is purchased for rental income
Thailand is today one of the largest economies in Southeast Asia, second only to Indonesia. The construction boom in Thailand, combined with its high resort potential, makes this country one of the most promising from a real estate investment standpoint. Thailand's real estate market is currently one of the fastest-growing in Southeast Asia. It is helped by relatively affordable property prices — here a square meter costs four times less than in Singapore. Thailand is also one of the countries where owners can earn the highest returns from renting out property. In particular, an owner can receive from 8% to 15% of the property's value per year in rental payments.
Thailand ranks 17th among the most popular countries for purchasing overseas real estate among Russians and CIS citizens. This country outperforms Malaysia, Singapore, Cambodia, Hong Kong, and the Philippines on many fronts. One explanation for this phenomenon is moderate land prices, as well as low construction and labor costs. All of this reduces the final cost of building or buying a "condo" or villa. According to experts' estimates, since 2008 the price per square meter of housing has risen from 1% to 5.5% annually on average across the country. In 2014, villas rose in price by 4.9%, townhouses by 5.9%, and apartments by 14%. This trend also continued in 2015.
According to Colliers International analysts, the luxury real estate sector, fueled by foreign buyers, is currently in the best position. On the other hand, demand for budget housing is being supported by Thai authorities through reduced tax rates. The stabilization of the political situation and major infrastructure projects are also having a positive impact on the market. Experts predict that going forward, price growth will be 5-10% per year depending on the type of property.
The downside of real estate in Thailand is the relatively small size of apartments. On average, these are 25-30 sq. m, which will cost approximately $60,000. "For the same price, you could buy 60 sq. m in Turkey," comments Vitaliy Yakovlev, head of the economic control department at Hayat Estate.
It's worth noting that over the past two years, the number of Russians buying housing in Thailand has decreased. The main reason was the fall of the ruble. "Two years ago, Russians crashed Thailand's real estate market. Before that, they were the main buyers of housing, and when during the crisis they started selling apartments for half price, it became unprofitable for developers to finish their complexes — their profitability went into the red. If a developer's cost for an apartment was $40,000, Russians were selling it for $20,000," says Yakovlev. According to him, the same situation occurred with villas. But a year later, Europeans — in particular the French — became interested in the country's real estate, which helped stabilize the situation. Citizens of China, the EU, the US, and Australia also began showing interest in Thai real estate. This year, budget options priced up to $80,000 were popular among foreigners. In second place in terms of popularity are luxury properties priced above $550,000. Commercial properties, particularly hotels, were in especially high demand.
Features of buying property
One of the mechanisms for buying real estate in Thailand is registering a company in the country. There are certain legal restrictions preventing a foreign citizen from purchasing a house in Thailand in their own name. Legally speaking, a house is not just a structure, but also the land it stands on. And under current law, land in Thailand cannot be sold to a foreigner. This restriction can be bypassed by acquiring so-called legal status — that is, by registering a company in the country. The cost of registering a legal entity in Thailand is about $1,000, with maintenance costing around $500 per year, which exceeds the cost of paying taxes. Thus, any foreigner can either buy property in the ownership of a Thai company or lease it.
In addition, the country has quotas on apartment purchases — in a complex, 51% of apartments must be bought by Thais.
How to earn $1 million on Thai real estate
First and foremost, real estate in Thailand is purchased for rental income. In many regions, long-term and short-term rentals yield high returns. In some complexes, developers offer a rental rate of 7% per annum already at the construction stage, provided the apartment is bought outright at full price. In the first year, while the complex is being built, the investor is paid 7% per annum. As soon as it is completed, the contract is automatically extended for ten years at 10%, with the percentage increasing each subsequent year. In the first year, the owner will receive 10%, in the second — 10.3%, in the third — 10.9%. In addition, ten years after the purchase, the developer can guarantee to buy back the apartment for 110% of the original price, and this percentage will also grow each year.
Over 15 years, it's possible to earn around $1 million on real estate in Thailand. As an example, let's take an apartment worth $330,000. If you rent it out for 15 years, the developer guarantees that during this time the investment will fully pay for itself, and on top of that you'll earn around $300,000. And if, after this period, you sell the property, the developer is guaranteed to buy it back for 110%.
The most popular areas in Thailand for buying housing are the islands of Phuket and Koh Samui, and the resorts of Pattaya and Bangkok. In democratic Pattaya, investors buy apartments and private houses at relatively low prices. And on fashionable Phuket and Koh Samui, mostly luxury-class villas. In the capital, there's demand not only for residential but also for commercial real estate.
Bangkok
In 2012, Bangkok was named the best city for leisure, doing business, and living. Every fifth luxury apartment in the capital today is sold to foreigners (foreigners own 23% of luxury apartments in Bangkok). At the same time, the market overall remains budget-oriented, with up to 70% of deals involving properties priced up to 3 million baht (75,000 euros). Apartment rentals in Bangkok are in demand among expats, whose number, according to the Ministry of Labor, grew by 9.5% to 79,000 people in 2015.
Pattaya
Besides being located on the coast, the resort city of Pattaya attracts both tourists and business people because from here it takes just an hour and a half to reach either the capital or Suvarnabhumi International Airport. Today it is the country's most popular resort.
About 90% of real estate in Pattaya is bought by foreigners. This is perhaps the only place where you can buy an apartment in a residential complex from $57,000. But even here, expensive housing is now being built — apartments in new residential complexes and villas can cost on average $3-4 million.
A big advantage of buying in Pattaya is that all apartments are move-in ready. New owners don't need to buy anything extra — furniture and appliances are already included. It's worth noting that property maintenance here costs $1 per 1 sq. m, while on the islands maintenance costs $2 per 1 sq. m. The main expense will be electricity costs ($50).
Koh Samui and Phuket
The islands of Phuket and Koh Samui are preferred by wealthy people, since property prices and the cost of living here are higher than on the mainland. The sea and beaches here are much cleaner than in Pattaya. In addition, Phuket has its own airport. While in Pattaya you can buy an apartment for $40,000, on the island it will cost no less than $120,000. Right now, a lot of complexes are being built right on the beachfront, where prices for 35 sq. m apartments start at $100,000. With registration and payments for the territory and infrastructure, you'll need to add another $15,000-30,000 to the apartment's price. In the center of the island, you can buy a 3+1 townhouse for $100,000.
Villas in a cottage village with an area of 230 sq. m, 400 meters from the ocean, start from $370,000. It's worth noting that local developers do not build villas in advance. For this, a potential buyer needs to fly to the island, agree on all the details, pay for the purchase, and in four months the villa will be ready. Apartments on the islands, unlike those on the mainland, are sold partially furnished. But at the end of construction, you may be offered all the necessary furniture for $3,000.
In some resort areas of Thailand, there is an oversupply of offers, since in recent years local developers have actively built new complexes, and investors quickly bought them up. In 2016, you can expect more offers to appear on the secondary market, as well as good discounts from sellers who need to find a buyer quickly.
Source of information — ABC News.
