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Phuket

Impact of investment crash “too early to tell’

Legacy Phuket Gazette

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Impact of investment crash “too early to tell’ | The Thaiger

PHUKET: While the stock market took the brunt of the “Black Tuesday” sell-off triggered by the capital controls put in place to stem speculation against the rising Thai baht, experts say that it is still too early to gauge the long-term impact on Phuket’s property market.

Although the 30% withholding requirement on foreign capital inflows was quickly rescinded for certain transactions, including direct foreign investment and stock market transactions, at the time of going to press the rule still applied to other forms of foreign investment, including property funds.

The draconian measures, adopted by the Bank of Thailand (BOT) on December 18, initially affected all capital inflows of US$20,000 (about 70,000 baht) or greater.

Foreigners were required to make a 30% withholding deposit with the BOT. Where it still applies, the measure effectively freezes up investment capital without earning interest for at least one year, after which time the depositor can apply for a refund.

Phummisak Hongsyok, Phuket’s representative to the National Legislative Assembly, told the Gazette that the BOT’s methods were strong but effective in stemming the baht’s rise against the American currency. He agreed with the BOT’s decision to relax the measure for stock market investment, saying it was too strict.

The long-term fallout on direct investment and the real estate market can be assessed only after January 4, when the holiday period has ended and further BOT adjustments may be announced, he added.

The currency control measures were the second government announcement to have a major impact on foreign investment in the property sector this year. The first was a Ministry of Interior order issued last May instructing provincial governors to crack down on foreigners using Thais as “nominees” to set up real estate investment firms, he noted.

Investor confidence would improve if the BOT had issued an advance statement of how the currency control measures were intended to affect foreign property investment, he said.

“The government has to make a clear-cut decision as to what extent they want to open up Phuket, and Thailand, to foreigners wishing to stay and invest here. This would include revising visa regulations to support long-stay tourism as well as currency controls,” he said.

Neighboring countries, such as Malaysia and Vietnam, had already adopted measures to promote long-stay tourism, he added.

Graham Bibby, Managing Director of the Richmond Group and also an experienced currency analyst, views the BOT’s latest actions as misdirected.

“The whole problem is not about the Thai baht going up. It’s about the US dollar going down. The BOT is focusing on the wrong thing … The BOT needs to educate its exporters. They worry about the exporters, but in most countries exporters know how to hedge the the currency – to lock in the currency rate…This is not a Thai baht problem, it is a US dollar problem. In my view, the Thai baht is going to go to 30 to the US dollar in the next six to eight months,” he predicted.

“For property investment, in some respects it is not so bad. The only problem is that it was on the front page of every newspaper, which portrays Thailand in a negative way.

“What I have been telling clients is that this proves my point that Thailand is too international now. In the old days, 15 or 20 years ago, they could do this. But now they can’t do this even if they want to because the international community will not accept it,” he said.

He agreed with K. Phummisak that the government should consider relaxing its stance on foreign ownership of property, perhaps by allowing foreigners to own one property freehold or by introducing some sort of “perpetual lease”.



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Bangkok

Top Five things to consider if you’re buying a condo in Thailand

Tanutam Thawan

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Top Five things to consider if you’re buying a condo in Thailand | The Thaiger

Not quite a Top Ten but some good straight-talking about buying condominiums in Thailand from Desmond Hughes from Hughes Krupica

One of the most commonly read or spoken summary of foreign ownership of property in Thailand is along the lines of

“Foreigners can buy a foreign freehold condominium in their name”.

At this sentence, many foreign investors switch off, and assume that the rest of the detail provided by the author may be legal mumbo jumbo or a thinly veiled attempt to win their business.

In fact, there is quite a lot you should know about Thai condominiums, before you start property hunting. As my clients don’t generally spend their time reading legal journals and legislation unless they have to, I have set out a mixture of legal and practical matters below without much distinction:

1. Only 49% of the Registrable Area of a condominium can be sold to foreigners.

In Bangkok, this is not likely to have any impact on you. Most of the buyers and owners of condominiums in Bangkok are Thai nationals. Even in condominiums popular with foreigners, it is an uncommon phenomena that foreigners would ever outnumber Thais as owners in a building. You might ask why the rule even exists, but there is a fear and protectionism in many Asian countries, not just Thailand, to try and keep foreigners ‘controlled’ through numbers and perecentages.

In other places – Phuket; Pattaya; Koh Samui; Chiang Mai and Hua Hin particularly you should apply caution to ensuring that the correct ‘quota’ of foreign units is available to be sold to you on a freehold basis.

2. Banks often advertise they will give finance, even potentially to foreigners, but in the end – don’t

I speak from personal experience and from that of my clients. For my first condo investment in Bangkok, I had to take out a loan with HSBC which was then taken over by a Thai bank. My loan had to be in foreign currency, because in order to buy a foreign freehold condominium – you have to send foreign currency into Thailand from overseas to generate ‘foreign exchange transaction forms’ to register the title to a foreigner at the land office. This means a lot of hoops for a bank to jump through simply to provide a mortgage. Foreigners are also viewed as flight risks by Thai banks and they do not wish to spend their time chasing foreign assets. This all means that a very high percentage of the foreign buyer market is cash based, which is good for the stability of that part of the condo market.

If you are tempted to try and take out finance applications to banks, be aware that the banks are looking for you to have some business in Thailand; perhaps to be married to a Thai national who preferable from the bank’s perspective will have some degree of wealth for self-support; and that you have other assets in Thailand with a history of using and paying off credit such as credit cards.

3. There is an oversupply of condominiums in Bangkok at the moment and rental yields are traditionally low in terms of % compared to more expensive Asian neighbors – Hong Kong and Singapore, and further afield

A condo in a prime rentable area at a high investment price can remain rentable due to its extremely useful location and amenities. If such condo has a 24 hour supermarket in the basement of the retail area and dozens of restaurants, as a condo building I am thinking of does have such amenities, then it will remain rentable for some time if the property is maintained. However, another condo at the end of the same ‘Soi’ and post building and delivery could remain unrented after many months and even if the rent is cut to 50% of the market price. Don’t just take my word for the state of the market for condo rentals in Bangkok, ask the agents.

In addition to this, the authorities are taking a closer eye at tax declarations and ‘cracking down’ on undeclared taxes – not just personal income tax, but the ‘business tax’ of 12.5% for renting units out. This all adds to the costs of investing and renting in a condo, and you must calculate this into your budget and forecasts to avoid living in fantasy land about dream returns.

3. You won’t have any say in how the condominium is managed

Unless you buy up over half of the voting rights attached to units in the entire building, you will be a minority voice on issues like the raising of the common area fees; use of the ‘sinking fund’ – the fund to make capital repairs, changes to the rules and regulations and general maintenance decisions, even of some significance. Don’t imagine standing up at an co-owners meeting voicing your opinions and somehow making headway in ‘changing’ the direction of the management of a building. The way in which a building is managed boils down to how the developer has structured ownership, whether the developer retains many units and a large % of the voting rights or not, and whether the developer plans to self-manage or outsource management of the asset to a reputable or not-so-reputable management company.

If you don’t check the management plan then I can reference lots of analogous situations where you would take more care – if you buy a car, you should think if there are any decent repair centres nearby and at a reasonable price – Ferraris in Phuket aren’t currently easy to maintain, I would imagine, as a non-Ferrari owner and observer of the state and condition of the roads in that Province. You also wouldn’t, I hope, buy a smart phone without knowing you could have the phone service, fixed and various parts replaced on reasonably short notice. As a property is a far higher value of investment, a lot of investigation into the management plan is necessary.

4. Don’t Believe the Hype – It’s a Sequel

False Media, we don’t need it do we? If you see a glossy marketing brochure and are told that the developer ‘has to deliver on its promises by law’ – be wary. To take one example, I bought a condo under which a ‘private wine cellar area with personal secure wine bottle storage space’ would be provided to every buyer. Amazingly, without any shame at all, the famous developer constructed an unchilled cheap wooden cabinet with glass doors, no locks next to 4 sofa chairs in the open space corridor between a swimming pool and the gym. If you wanted to fry an egg on the ‘wine cabinet’ then that was highly likely to have been possible.

These kind of things are not all ‘horror stories’ – I actually got a decent condo notwithstanding the missing items. However, you will often have to compromise when in more highly regulated and supervised jurisdictions, you would not. Compromise is a very common work in Thai society and it applies to business and consumer purchases too.

5. Set up your ownership for easy re-sale

If you are buying a condo as a ‘foreigner’ and paying cash, then you can buy your condo through a foreign company, and sell the company later. This is only worth doing if the cost of setting up and maintaining the foreign company is reasonable and the company you set up is ‘saleable’ and attractive to others. You should not carry out this kind of structuring to ‘avoid tax’. However, you can set up this kind of structure, pay tax on the purchase, and subsequently deal with your company as you see fit, provided a buyer is willing to buy it. If such a company receives rental income, then even if it is foreign it is till liable to taxes as the use of the ‘immoveable property’ for generating revenue isn’t deemed to be ‘outside’ of Thailand, and that applies even if the company tries to contract for and receive the rent outside of Thailand.

Desmond Hughes has operated and owned 2 law firms in Asia in 14 years spanning Thailand; Vietnam; Indonesia with clients in all of Asia and other markets investing inwards into the region with his existing firm Hughes Krupica possessing a large market shares in its fields of expertise. 

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Phuket

Motorbike driver smashes through glass window after accelerator malfunctions

Tanutam Thawan

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Motorbike driver smashes through glass window after accelerator malfunctions | The Thaiger

A female motorbike driver has sustained injuries after her motorbike’s hand grip malfunctioned and she collided with a glass wall. Chalong Police were notified of the incident at an air conditioning shop at 6pm yesterday on Chao Fa West Road in Chalong.

Police and emergency responders arrived and found the shattered glass wall and a damaged motorbike. The injured 40 year old Naowarat Jankarn had already been taken to Chalong Hospital. She sustained injuries from cuts from the broken glass. Pools of blood were found on the floor.

Ms Naowarat told police that she had parked her motorbike in front of the shop since Wednesday . The motorbike was undrivable because the hand grip accelerator was malfunctioning.

Yesterday she started the motorbike, claiming she had forgotten about the broken accelerator.

Motorbike driver smashes through glass window after accelerator malfunctions | News by The Thaiger Motorbike driver smashes through glass window after accelerator malfunctions | News by The Thaiger Motorbike driver smashes through glass window after accelerator malfunctions | News by The Thaiger Motorbike driver smashes through glass window after accelerator malfunctions | News by The Thaiger Motorbike driver smashes through glass window after accelerator malfunctions | News by The Thaiger

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Phuket

Police hunting for driver who threatened others with a gun on Phuket road – VIDEO

Tanutam Thawan

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Police hunting for driver who threatened others with a gun on Phuket road – VIDEO | The Thaiger

PHOTO: Tiw Tiw

The Thalang Police are hunting for the driver who was threatening other motorists on Thepkrasattri Road by waving a gun around out of the driver’s window of his red sedan in Thalang this morning.

A Facebook user ‘Tiw Tiw’ has posted the video with a message reading “where are the police, please follow him. The incident happened this morning in Thalang.”

The video shows a car switching from one lane to another.  The driver shows a gun in his car window and then appears to throw it out (at least he used his indicator).

The Thalang Police are investigating the incident and want to find the car driver for questioning.

 

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