PHUKET: Separating emotional excitement from the need to impartially assess the risks of an important investment when purchasing a dream home is not easy.
A real estate agent may have shown the purchaser glamorous photographs and conducted a personalized tour, so the desire to sign on the dotted line might impair the purchaser’s judgment.
The real estate industry in Thailand, including Phuket, is largely unregulated and it is therefore imperative that a purchaser consider the following steps and tips as a pre-requisite to achieving the dream.
The Developer: In an unregulated market, and, particularly when buying a property off-plan and therefore unseen, a prudent purchaser should do all they can to check a developer and his track-record.
When buying off-plan there is nothing to see beyond the glossy marketing information, and until construction is completed the purchaser is always under a degree of risk.
A new developer will by definition have no track-record so the purchaser must do all he can to talk to other purchasers and real estate agents. While it is inevitable that some risk must be accepted, let’s keep that risk to a manageable level.
As freehold title is not available to foreigners, aside from condominiums (the subject of last month’s article), any acquisition made in a foreigner’s personal capacity must be leasehold, so the developer/land owning company will be the purchaser’s landlord.
A prudent investor must therefore establish that the landlord seems likely to be able to uphold his long term obligations under a lease. If the economics justify it, procuring a letter of good standing from the Bank of Thailand or a company credit report might be well justified. A long term lease from a public listed company would be ideal, however an unlikely prospect.
Payment: Property construction generally requires payment by a schedule of installments, the frequency of which is determined by milestones in construction being met. The schedule needs to be carefully considered both in respect of the purchaser’s ongoing budget and in respect of the milestones themselves to ensure that the payments fairly reflect the value of the works completed at each stage and are not too front-loaded thus leaving insufficient funds to complete the structure.
The advice of an independent engineer or surveyor might prove invaluable.
Leap of Faith: The decision to purchase having been made, the next step is often (although not always) to make a reservation by executing a Reservation Form and paying a small percentage of the overall price as a proportion of the deposit. This is a show of commitment, which ties both parties to the process and triggers a defined time line within which it is expected that the contract terms will be settled.
Care must be taken, as the reservation fee ought to be refundable in certain circumstances, in case it is discovered that there is an irreconcilable defect in title.
A purchaser should be aware that for all payments into Thailand it is prudent to remit foreign currency. The on-shore rate is better than elsewhere.
Contracts: Having made a reservation, the parties will need to agree to the form of contracts, which might comprise a sale and purchase contract, a long-term lease, a construction contract, maybe a management contract, and the form of transfer of a building permit for villa ownership.
The contracts will all need to be carefully considered and adjusted according to the best interests of both parties. Competent developers will have all necessary base documents in place to ensure a smooth transmission for the purchaser and his lawyer to review.
Legal Advice: In Thailand the law does not guarantee clear title. All title and land issues should be investigated in the district where the property is located.
When choosing a lawyer, a local presence is beneficial. Quality legal services need not be expensive and it should be possible to agree to a fixed fee rather than employ a lawyer on an hourly rate basis. A reputable firm will have no hesitation to advise initially on a no-charge basis and discuss what is necessary to set the purchaser at ease.
Ownership: The review and negotiation of contracts must be done expeditiously and effectively in order to protect the investment.
Until the point of registration, which may be at some distant date depending on the payment terms, an effective contract is the purchaser’s only real security. A lease in Thailand can only be registered for a term of 30 years, and although that lease term may be renewed on two occasions, the landowner’s obligation to do so depends on the contract. The contract must therefore be written in a way that obliges the landowner to ensure any successor is similarly obliged to renew the lease and that the lease shall be binding upon and inure to the benefit of any succeeding party.
Equally the contract must provide that the purchaser has the right to pass on the lease to
another, who shall be similarly protected. Occasionally the landowner’s obligation to renew can be underscored by the purchaser obtaining a minority, but controlling interest, in the landowning entity.
Ownership of a lease through an off-shore company is also an option, enabling a property owning company to be sold with no taxable event occurring on-shore within Thailand.
Construction: During the construction phase, the purchaser should be regularly informed and updated, with construction milestones being achieved triggering payment installments. Factual accuracy might be checked by an engineer or surveyor as previously described. More on construction in next month’s article in the Phuket Gazette!
Warranties: Any property will suffer small defects after construction is completed and a good developer will promptly and efficiently remedy the same.
While condominium purchases carry a statutory one year warranty by law, the purchaser of a villa will have to rely on his contract. Typically the structure itself will be guaranteed for two years, with non-structural items (for example water pumps and appliances) guaranteed for one year, and individual warranties provided for swimming pools and those items with longer guarantees from the suppliers or manufacturers.
The law in Thailand does not provide protection against latent defects (those defects which might appear at some later stage but which are previously undetectable to the naked eye) so these need to be provided for within the construction contract.
General: When a project is completed (sometimes not until the inclusion of neighboring villas) and any mortgages on the land are redeemed, the developer will be ready to proceed to registration.
Registration at the land office is the purchaser’s principle security. Although the means of ownership differ within Asian countries, the process of purchase and registration is not so different.
In Thailand the use of nominee shareholders in land owning companies is illegal, so the purchase of leasehold interests is common and well tested. In Indonesia, by contrast, property may be owned directly by foreign companies, whereas in Thailand, land may only be owned by Thai nationals or properly constituted Thai companies, hence the practice of leasing. Other countries allow longer lease periods, and some countries allow foreign freehold purchases over a certain monetary value. The point is that, although Asian countries have different rules, any prudent purchaser must decide what is comfortable to them relative to the desired country.
In Thailand the real estate industry is still largely unregulated, although consumer protection is on the increase, particularly regarding condominiums, but the protection is not yet as sophisticated a
Tale of two cities – Hua Hin vs Pattaya
by Kornrawee Panyasuppakun
Property buyers looking to buy a seaside villa or condo in a coastal town in Thailand, relatively close to Bangkok, confront one question – should I buy a property in Hua Hin or Pattaya?
And rightly so, because these two choices have similar aspects. Both have kilometres of coastline, good beaches, and are just a couple of hours away from Bangkok – 3 hours for Hua Hin and 2 hours for Pattaya. They also have good year-round weather, large expat populations, and are some of the best places in Asia for water-sports and playing golf.
Yet, each place suits buyers with different lifestyles and goals.
Town or City?
If you want a laid-back beach town feel, Hua Hin is the right choice. If you like to live in the middle of action, with a greater range of things to do, Pattaya is the winner. It is simply more established and has a longer development history in terms of western-style villas and condominiums.
Hua Hin has a population of around 100,000 plus a growing tourist reputation. The lazy town offers long, sandy beaches that run 5 kilometers along the coast and are not fully obstructed by high-story condos on the beach, due to building regulations.
Hua Hin may not be the best place to swim in Thailand, as the sea-bed is a bit rocky, but it makes up for it with clean beaches, dedicated beach cleanup groups consisting of locals and expats, and regulations which, among others, restrict commercial tourism on the beaches on Wednesdays, and town planning which controls high-rise along the coast.
Hua Hin also suits those in search of a peaceful getaway because the town does not have a seedy reputation and is far from any industrial enterprises. This is thanks to a strong tradition of royal patronage and residence in the district, such as Mrigadayavan Palace and Klai Kangwon Palace, the latter is owned by the late King Bhumibol Adulyadej (Rama IX).
Nevertheless, the town has a growing reputation for restaurants and new attractions for tourists; it is a favourite resort town for Thai upper-class and Bangkokians who like to go to Hua Hin on weekends.
Check out the largest selection of properties in both towns HERE.
Pristine beaches of Hua Hin, larger and longer than Pattaya
Pattaya, on the other hand, is home to almost 400,000 people, plus plenty of international tourists. The city is highly developed and has a higher density of high-rise buildings along the coastline and many great sea-view villas on the hillside, both of which are harder to find in Hua Hin due to the tighter building regulations.
During the day, the beaches in Pattaya attract sun worshippers and all different types of water sports, from kitesurfing to waterskiing. At night, Pattaya’s Walking Street is an international adult entertainment playground. But that doesn’t mean you can’t find a quiet place in Pattaya. There are less-popular beaches like Jomtien Beach and nearby islands like Koh Larn and Koh Samet.
Pattaya is part of Thailand’s eastern seaboard, the Eastern Economic Corridor, meaning the city is situated close to Thailand’s main industrial facilities and sea ports, as well as airports like Suvarnabhumi Airport, which is around an hour and a half away by car. It also has its own airport about 40 minutes from town called U-tapao International Airport.
The famous sweeping coastline of Pattaya, a haven for nightlife and entertainment options
Holiday home, Retirement, or Investment?
Hua Hin and Pattaya are both highly qualified for holiday home buyers with an impressive choice of villas and condominiums. But Hua Hin is better known for retirement and Pattaya for investment.
Hua Hin has been named as one of the best retirement locations in Asia by countless surveys. It offers a high standard of living, great golf courses, first-class restaurants, quality medical care, close proximity to Bangkok, as well as “the big foreign community that connects through reading clubs, festivals, cycling clubs, soccer leagues, wine tastings and darts tournaments,” wrote the US News and World Report in 2019.
Foreign property buyers are those who buy a holiday home or a retirement residence. Most are from western countries, especially those from Scandinavia, Germany and England. Many buy in Hua Hin to spend the winter with their families, rent out when they are away, and eventually live there when they retire. Also, a hi-speed railway will soon be built to link Hua Hin with Bangkok, which will make travelling to Bangkok airports even more convenient. It already has a multi-lane highway, train and bus services.
Pattaya is a popular choice for investment. It has a large and growing tourism industry, with over 12 million tourists last year, as well as a healthy mix of nationalities, including Israeli, Russian, European, Indian, and Chinese, making its tourism less susceptible to change from a single demographic.
Additionally, Pattaya is part of the Eastern Economic Corridor, the Eastern seaboard that targets high-tech industries and attracts foreign direct investments, especially from Japan. It is also linked to Bangkok airports, sea ports, and main industrial facilities in Chon Buri and Rayong by the upcoming hi-speed rail. Plus, the city itself is positioned as an international medical hub.
Overall, a stream of foreign tourists and business travellers means a steady source of income for investors. Those who buy the property to rent out short-term and long-term can enjoy a realistic Return On Investment of about 7 – 8% year. In Pattaya you can already see investors from Western countries as well as Asian countries, from China to India and the Middle East.
There is an excellent selection of international-standard golf courses in Hua Hin
Both offer a cool selection of eateries, shopping malls, and activities, but if compared by the variety of choices, Pattaya is the hands down winner.
That isn’t to say that Hua Hin doesn’t have plenty of options. Most buyers in Hua Hin like to play golf and enjoy the outdoor spaces – town is one of the best golfing destinations in Asia. There are also first-class Thai and international restaurants, a huge eco-friendly water park, and several night markets that sell fresh seafood and local crafts, like Hua Hin Night Market and Cicada Market.
Furthermore, Hua Hin has stylish shopping malls like Blueport and Market Village, the latter of which offers so-called “you hunt, we cook” options. You can also try the new Latitude Wines at a vineyard in Hua Hin or head to a cool bar that offers familiar labels.
Pattaya may be infamous for its red light areas and nightlife – go-go bars, beer bars and nightclubs – but that is not the only side of Pattaya. In Pattaya you can find quality lifestyle with a burgeoning choice of family options and entertainments.
It offers a range of Thai and international cuisines, from award-winning restaurants with amazing views, sky bars, and Italian wine bars, to family-run restaurants, 100% vegan places, and local seafood. It also has a range of options to entertain people with different budgets.
Pattaya also offers lots of chic shopping centees like Terminal 21 Pattaya, Central Festival Pattaya Beach and Central Marina. There are also lots of family-friendly choices like water parks and museums, in addition to a wide range of extreme sports, such as Muay Thai, kitesurfing, waterskiing, and skydiving. You can also go snorkeling or plan a day trip to nearby islands like Koh Larn and Koh Samet.
In both cities, you can expect to find theatres with international blockbusters and supermarkets that sell western products. And there is a daily ferry between Hua Hin and Pattaya (during high season).
Expat families can find an excellent international school in both cities.
Hua Hin has a couple of options for expat families. With quality education and great sporting activities, Hua Hin International School, for instance, is one of the choices that follows the national British curriculum and the IB program, and recruits teachers from the UK. There are also several bilingual programs available.
Expats in Pattaya have more choice when it comes to international education. There are several internationally-recognised international schools with excellent facilities like hi-tech campus, drama studios, and a big theatre. Some of the best schools are St Andrews International School, Regents International School, and Tara Pattana International School.
Hua Hin and Pattaya offer high-quality hospitals that cover basic and advanced medical care and cater to patients with different budgets.
Top private hospitals in Hua Hin are, for instance, Sao Paulo Hospital which caters to lower budgets, and Bangkok Hospital Hua Hin which is part of the renowned BDMS group. These hospitals both offer quality specialist care including cardiology, urology, and orthopaedics, to name a few, and English is widely spoken.
For Pattaya, top hospitals are Bangkok Hospital Pattaya, Pattaya International Hospital, and Pattaya Memorial Hospital, with Bangkok Hospital Pattaya charging the highest fees. Also, as Pattaya is recognised as one of the best medical tourism centres in Thailand, and the region, there are tons of tourists flying to the city for medical care, and hospitals employ staff who are fluent in various languages.
Bangkok Hospital Pattaya, for instance, has interpreters in more than 20 languages, including Arabic, Chinese, French, German, Russian, Spanish, and Swedish.
The bottom line … It depends on your goals and lifestyle. If you want a peaceful hideaway with grand royal history, or are a golf enthusiast, you may choose a property in Hua Hin. If you want to a city that is always switched on, close to investment areas and airports, and has lots of leading international schools and shopping malls, you may like Pattaya more.
Hong Kong property investors turn to SE Asia
From luxury Singapore apartments to Malaysian seafront condos, Hong Kong investors are shifting cash into Southeast Asian property, demoralised by increasingly violent protests as well as the China-US trade war.
Millions have taken to the streets during four months of pro-democracy demonstrations in the southern Chinese city, hammering tourism while also forcing businesses to lay off staff – and the property sector is feeling the pain. Property stocks in one of the world’s most expensive housing markets have plummeted since June, with developers being forced to offer discounts on new projects and cutting office rents.
Hong Kong businessman Peter Ng bought a condominium on the Malaysian island of Penang – which has a substantial ethnic Chinese population and is popular among Hong Kongers – after the protests erupted.
A 48 year old stock market and property investor told AFP he was worried about long-term damage to the Hong Kong economy if the unrest persists.
“The instability was a catalyst for me. Investors will always look at things like that, political stability.”
And Derek Lee, a Hong Kong businessman who owns a Penang apartment, said he knew others in the semi-autonomous city who were considering investing in south east Asian property because of the unrest.
“People are thinking about how to quicken their ideas, how to make a more stable life,” the 55 year old told AFP. Part of the allure of Malaysia is its relative affordability and prices much lower than Hong Kong.
The Malaysia site of Southeast Asian real estate platform Property Guru has seen a 35 percent increase in visits from Hong Kong, according to its CEO Hari Krishnan.
While Hong Kong’s protests are primarily pushing for greater democratic freedoms and police accountability, the summer of rage has been fuelled by years of simmering anger towards Beijing and the local government over falling living standards and the high costs of living.
Hong Kong’s property market is one of least affordable in the world with sky-high prices fuelled, in part, by wealthy mainlanders snapping up investments in a city which has failed for years to build enough flats to meet demand.
But now mainland Chinese, who traditionally viewed property in Hong Kong as a safe investment, are opting for rival financial hub Singapore as a result of the protests and the US-China trade war, according to observers.
There has been a jump this year in sales of luxury apartments in the city-state, which like Hong Kong is known for pricey property, driven partially by mainland Chinese buyers, according to the consultancy OrangeTee & Tie.
“The protests in Hong Kong have made some of the (mainland Chinese) based there… (more concerned) about investing in Hong Kong real estate, so they carry that investment to Singapore,” said Alan Cheong, executive director of the research and consultancy team at Savills.
As well as hitting China’s economy, trade tensions may have discouraged some Chinese from investing in the West and pushed them towards Singapore, with its mostly ethnic Chinese population.
“I think they don’t want to go to the West.”
Singapore is “the closest country culturally to China other than Hong Kong and I think they feel more comfortable with that”. There are further signs the stable, tightly ruled city is benefiting from the Hong Kong turmoil. Goldman Sachs last week estimated as much as $4 billion flowed out of Hong Kong to Singapore this summer.
And analysts warned there was little hope of Hong Kong’s property market recovering soon.
“Hong Kong property share prices have corrected by about 15 to 25% since July,” said Raymond Cheng, head of Hong Kong and China property at CGS-CIMB Securities International.
Residential sales were still holding up but only when developers offered discounts, office rents were expected to fall by as much as five percent and shop rents were also badly affected, he said.
But despite the unrest, businessman Ng, who will rent his Penang property and has no plans to move there permanently for now, was still hopeful about Hong Kong’s long-term prospects.
“The problem may not be solved in the short term but it is not so serious as pessimists think. Everything is still in the government’s control.”
SOURCE: Agence France-Presse
Stricter controls and paperwork putting brakes on residential property market
The honorary president of the Thai Housing Business Association, Atip Bijanonda, is tipping the local residential market may fall by up to 10% this year starved of economic confidence, the global economic slowdown and the loan-to-value limits.
But he also believes the situation is far from the situation leading up to the 1997 economic collapse.
The Greater Bangkok residential market is now valued at 372 billion baht (in 2018). That’s a rise of 29% compared to the year earlier. So the drop this year is off the back of a very successful 2017.
For this year the market has fallen by 5%, according to the Thai Housing Business Association, with the largest declines in Q2, in retaliation to the LTV limits taking on April 1.
Some of Thailand’s major developers are now shelving some projects as the market soaks up a glut of properties constructed over the past two years.
Three property associations – the Housing Business Association, the Thai Condominium Association and the Thai Real Estate Association – are having meetings with the finance minister discussing the current property market.
Topics for discussion are the improvement in property regulation, construction permits, licences and stricter controls over developers and lending. The associations also want to discuss the current delays on Environmental impact assessments (EIAs). They say that since the responsibility for EIAs was handed over to the Bangkok Metropolitan Administration from the Office of Natural Resources and Environmental Policy and Planning in 2016, the process is now taking much longer.
Speaking to the Bangkok Post, Kobsak Pootrakool, deputy secretary-general to the PM for political affairs says that stricter lending criteria and the LTV rules are the main factors obstructing mortgage approvals for homebuyers
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