Property Purchases by Foreigners in Thailand - By: Gregory Smyth
Despite several restrictions imposed on foreign investors looking to make land and property purchases in Thailand, as the investment opportunities in Thailand are so lucrative, many foreigners favor the market anyway and use various practicable ways and means enabling them to get around or work with the limitations.
Thailand's return to democracy after a 15 month military rule has already had a positive impact on the property market. There have been a notable number of deals completing during high season in Phuket as well as more visitors to the sole agency projects. The newly elected government has begun to take initiatives toward a more open and favorable policy for foreign property investors. It has already taken away the 30% capital control which is thought to support bringing back foreign investments.
Property financing for foreigners in Thailand is available now. When we buy a property back home, one of the first things coming to our mind is financing. Even for those who have enough funding and liquidity for owning a property, financing is often perceived as a way of leveraging investments. For buyers with less access to funding, financing is an unavoidable vehicle they utilize to own that dream home. Considering this, Thailand is the same as any other countries.
Most of the financial institutions in Thailand offer loans for property purchases to Thai citizens and companies centered on similar criteria we are familiar with in our home countries. However, the similarities do not extend from there for most foreigners buying property in Thailand.
The issuing of the new tax incentive package is also an attractive move for the market interested in property purchases. This is anticipated to fuel market sentiments on both the demand and supply sides. Property Transfer fee will be decreased from 2% to 0.01% and Specific Business Tax for property transactions will be decreased from 3% to 0.1%.
Reliability in the market could be improved further by longer lease terms, stretching from the current 30 years to 90 years. The beginning of business lending to foreign property investors should also be considered by the government. Policies like these would enable Thailand to keep pace with its emerging neighbors, Vietnam and Malaysia, relating to property purchase terms. So, more encouraging outlook is expected for the Thai property market in 2008 than in 2007.
Since the December election, foreign investors have shown increased interest in property purchases. Established developments have witnessed a particularly alive high season. Newly awarded projects have also met with a positive response by foreigners in Thailand.
A similar trend is witnessed in Samui with a clear rise in visiting and purchases of resort properties. With surge in flight schedules, further demand will be anticipated in Samui. The Samui market for luxury villas is closing on Phuket, with the establishment of international hotel brands wooing quality tourism. Samui used to be a less favored beach destination, but this is not at all the case now as it is emerging rapidly as a beach destination. Lots of high net worth investors are now increasingly keen.
The Treasury Department's recent land value appraisal displayed that land values in Phuket have rose by an average 160 per cent over the past four years, with Samui prices following closely. The steady rise in land prices on Thailand's coast points to the confidence in the market and its long term prospects. If you are ready to forget the unfriendly past of Thailand and show renewed faith you are set to benefit.
Ongoing, an investor may require paying income tax on an income he attains from his investment property in Thailand but may be quite happy to realize that there is presently no capital gains tax in Thailand. There is also a Land Tax and Structures Usage tax that an overseas investor may have to pay on their property assets but both are very much affordable. Wise foreigners in Thailand always go for the right choice in property purchases and this is definitely one among them.
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For nearly 30 years, Bamrung Suvicha Apisakdi Law Associates (BSA Law) has focused on providing reliable legal advice and services to the Thai and foreign business community in Thailand. We provide international standards of legal services while retaining the customs of the Thai business culture.