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Property Watch: Unanswered questions in the Thai property market

Legacy Phuket Gazette

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PHUKET: I will admit, to anyone who asks, that consultancy services often involve assisting people with the kind of matters for which they should perhaps go to the authorities to receive assistance and guidance.

Nevertheless, for one reason or another, consultancy services often involve providing advice to clear up uncertainties over laws, rules and regulations that are difficult to understand and implement.

This uncertainty can adversely affect or even permanently damage the property market. It causes fluctuations in the perceived value of the market, even though the actual tangible market values and assets keep their fundamentals as a constant.

One of the first principles of contract law in civil and common law jurisdictions is that a contract can be voided for uncertainty. You have to define what you mean before you can enforce something. That is just common sense.

Similarly, if a law is brought into effect and it governs the behavior of citizens and persons within a jurisdiction, then that law should be clearly defined, too. Unfortunately, laws can often be vague and uncertain, or just really out of date.

Sometimes I feel that we are living with increasing uncertainty. I hope the pendulum in Phuket is swinging more toward clarity about what is, and what is not, acceptable under the law.

Property investors surely get many different answers to the same old questions. I’m quite sure obtaining clear information can be frustrating.

Here are some of the issues of uncertainty often discussed around coffee tables and in consultations:

1) Isn’t it illegal for a Thai company that owns property and has foreign shareholders to do business?
2) What happens when a 30-year lease expires; can the renewals [3×30 years] be enforced?
3) Can foreign owners take shares directly or indirectly in a company that becomes their landlord?
4) Is the land I am looking at investing in through purchase of a property – a townhouse, a condo or villa – based on a legitimate title, or can the title simply be taken away?
5) If I buy a villa near a beach and restaurants, will the restaurants be bulldozed shortly after my purchase has been completed?

These questions never disappear, and the answers always remain illusive and confusing. I can’t say that the answers haven’t changed over the years, because they have. As governments have changed, so have the laws.

Phuket is currently experiencing an influx of large Thai developers investing in land with a view to building upscale projects for sale at reasonable prices in order to attract a new wave of potential buyers: investors emerging from the tourism sector and becoming property investors. Judging by the languages options on many of the broker websites, Chinese and Russian buyers are clearly the target audiences.

These investors will want transparent answers about what they can and can’t do. They are probably used to getting clear answers in their home countries, but won’t adapt well to living in a perpetual cycle of doubt.

The onus is upon all property professionals to communicate as honestly and as clearly as possible about the dos and don’ts in the local property market. Even to this day, I still hear agents telling their potential buyers that it is ‘easy’ to set up a Thai company and just ‘put some shareholders’ in there.

By now, though, most people should know better.

Ideally, it would be very helpful for professionals in the property industry to reach a consensus about the information disseminated to clients, to avoid confusing and damaging the market.

The problem is that regulatory measures are difficult to enforce, so many foreigners end up applying their own set of rules to communications without regard to local rules and laws, making it difficult to detect and filter misinformation.

Ultimately, the final issue to deal with is that if you do search hard for clarity and truth, you will find it, but you might not like the answers you get.

I do have high hopes for the future of Thailand’s property market, but developing any certainty in it is quite a long way off. Some investment of time and energy is, I believe, required beyond the glossy brochures.

Desmond Hughes has been an owner and operator of his law firm in Thailand for 14 years, and is a Senior Partner at the Hughes Krupica law firm (hugheskrupica.com).

— Desmond Hughes

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Property

Thailand’s property market waits for an end to Covid-19

The Thaiger

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Thailand’s property market waits for an end to Covid-19 | The Thaiger

The Coronavirus outbreak poses challenges for Thailand’s property market as potential Chinese condominium buyers remain stranded in China. Meanwhile, some believe that the outbreak may bring opportunities for non-Chinese buyers and in the long-run, the Chinese may be looking for an overseas refuge in the event of these types of emergencies popping up again

Through all this, there will be a certain level of pent up demand for Thai real estate.

Of course, it’s not just the Chinese unable to come and inspect potential buys, the rest of the world is also mostly shut out of Thailand.

Market remains weak

The pandemic is hurting the condominium market as Chinese nationals were accounting for half of the international buyers in Thailand, or 57.6% of the total foreign condo owners in 2018.

Vichai Viratkapan, acting director-general of the Real Estate Information Centre says that 50% of Chinese condo transfers are expected to disappear in the first 2 quarters of this year and the total transfer value by the Chinese will miss the mark of the usual 29 billion baht by about 25% (around 7 billion).

However, since Chinese property buyers only make up 6% of the total international and domestic housing transfers in Thailand, the proportion of total housing transfers in the country is likely to be similar to last year.

Developers looking to sell current stock whilst shelving new projects

CBRE reports that most Thai developers are postponing the launch of new condo projects to focus on clearing existing stock.

“Discounting completed projects to generate quick revenue as a financial lifeboat is the best solution for many of the country’s larger developers whilst the market is in limbo.”

Rathawat Kuvijitrsuwan, head of CBRE Research and Consulting in Thailand believes that, now business is gradually recovering, a few developers have started to launch new condominium projects.

“In the first half of 2020, the Bangkok condominium landscape was gloomy with fewer than 10,000 condominium units launched, which was much lower than the total number of new launches in the past three years of more than 60,000 condominium units per year.”

The Chinese are reluctant to complete transfers

The virus has continued to affect hospitality operators, including hotels and condominiums that service tourists, nationwide. Since China has suspended tours, put restrictions on movement, and locked down cities, home to over millions of people, it also poses a threat to real estate developers as their clients are unable or unwilling to fly.

“Currently multiple off-plan condominium developments are approaching completion, and Chinese clients are unable or unwilling to transfer. Chinese clients who made a reservation in Q4 2019 are requesting a refund and withholding their investment,” said Marciano Bijmohun, Business Development Director at FazWaz Property Group.

He believes every condominium that is in transfer status will see the percentage of non-transfer units rise in the coming months.

“These non-transfer units will cause a big financial hit to developers.”

If a client refuses to transfer, does not comply with the terms and conditions stipulated in the sales and purchase agreement, and decides to release the property, their deposits will be forfeited.

“However, there is some good news, these non-transferred units can be offered with a discount to new clients.”

Also, as China has been susceptible to a few disease outbreaks – from bird flu to the current coronavirus – it may prompt Chinese buyers to look for second homes outside of China.

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Bangkok

Silom Road tops as the most expensive area to buy land in Bangkok

Caitlin Ashworth

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Silom Road tops as the most expensive area to buy land in Bangkok | The Thaiger
PHOTO: Unsplash: Paul Szewczyk

Silom Road, Bangkok’s nightlife district, is the most expensive area to buy land in Bangkok, followed by Phloen Chit Road, according to data the Treasury Department gathered from 2016-2019. The pandemic may have fluctuated the prices, but no data on land value for 2020 has been reported by the department. They also say only asking prices were recorded, so it’s unclear how much the price decreased by during negotiations.

On Silom Road, land prices per square wa are up to 1 million baht while land on Phloen Chit Road have been reported to cost up to 900,000 per square wa. A square wa is about 4 square metres. Land on Rajadamri Road ranges from 750,000 baht to 900,000 baht per square wa. The cheapest areas to buy land in Bangkok are farmlands in the Bangkhuntian district. Land prices range from 500 baht to 10,000 baht per square wa.

Properties on Silom Road are also the most expensive in Bangkok. The price for a 170 square wa 4 storey office on the road costs around 155 million baht, according to the data. The highest asking price was 7 billion baht for a 37 storey office building on Sathorn Road.

Here are the top 10 most expensive areas to buy land in Bangkok:

1. Silom Road at 700,000 baht to 1 million per square wa

2. Phloen Chit Road at 900,000 baht per square wa

3. Rajadamri Road at 750,000 baht to 900,000 baht per square wa

4. Rama I Road at 400,000 baht to 900,000 baht per square wa

5. Wireless Road at 500,000 baht to 750,000 baht per square wa

6. Sathorn Road at 450,000 baht to 750,000 baht per square wa

7. Yaowarat Road at 700,000 baht per square wa

8. Thaniya Road, Pattanapong Road, Pattanapong II Road at 600,000 per square wa

9. Narathiwas Rajanakarin Road at 280,000 baht to 600,000 baht per square wa

10. Ratchawong Road, Sampeng Road at 550,000 baht per square wa

SOURCE: Nation Thailand

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Thailand

Thai condo developers clearing inventory rather than starting new projects

The Thaiger

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Thai condo developers clearing inventory rather than starting new projects | The Thaiger

“With waves of uncertainty and financial stress crashing into the market from the COVID-19 pandemic, most residential property developers have decided to postpone their plans.”

CBRE, the international property consultants, reports that most Thai developers are postponing the launch of new condo projects to focus on clearing existing stock. Discounting completed projects to generate quick revenue as a financial lifeboat is the best solution for many of the country’s larger developers whilst the market is in limbo.

Rathawat Kuvijitrsuwan, head of CBRE Research and Consulting in Thailand believes that, now business is gradually recovering, a few developers have started to launch new condominium projects.

“In the first half of 2020, the Bangkok condominium landscape was gloomy with fewer than 10,000 condominium units launched, which was much lower than the total number of new launches in the past three years of more than 60,000 condominium units per year.”

Since June, CBRE Research says new condominium projects, along new extensions and future routes of mass transit lines, with starting prices under 2 million baht, and those along existing mass transit lines are usually priced lower than 3 million baht.

“On the other hand, there has been no newly launched condominium in the high-end and above segments this year due to the high level of unsold supply and high land cost in prime locations. Investors have become more cautious in spending a large amount of cash during these uncertain times.”

“Some of the newly launched condominiums have had a good sales rate during their first launch. Most of these projects have been launched with a product and pricing that are mainly targeting large demand from buyers with lower-purchasing power and are located in an attractive location with limited available condominium supply in the area.”

But despite the slowdown of general activity and the current sales and promotions to dispose of excess stock, over 60,000 condos are expected to be completed this year and around 80,000 units each year over the next 2 years.

“With over 140,000 condo waiting to be transferred over the next 2 years, there is a possibility that a large number of booked units could return to such a volatile market as some cash-strapped buyers could decide not to transfer their units.”

“The future of the condominium market depends on the direction that residential developers will take collectively. With the 10 year record low number of newly launched condominium projects, this is the moment for the market to correct its long-standing oversupply and overpricing issues.”

CBRE Research believes that there are still opportunities for developers, including the 4 under-construction mass transit lines that are expected to be completed in 2022, the new Bangkok City Planning that will unlock many new locations for condo development and foreign demand that will come back… eventually.

To find the best range of condos, houses and villas, around Thailand, click HERE.

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