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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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Local Thai journalist speaking fluent Thai and English. Tanutam studied in Khon Kaen before attending Bangkok’s Chulalongkhorn University.

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1 Comment

1 Comment

  1. Avatar

    foot

    September 29, 2017 at 1:14 pm

    The bottom line is don’t buy a condo. While there are some that have worked out, the huge percentage of buyers lose everything they spent.
    The author also fails to mention how many times the Thai who holds the 51% changes the locks and throws farang out. Usually the wife, girlfriend, or “trusted” Thai associate.

    BTW, all of these warnings also apply to any timeshare, regardless of what country it’s purchased in.

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Bangkok

Third runway for Suvarnabhumi Airport

Tanutam Thawan

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Third runway for Suvarnabhumi Airport | The Thaiger

The Thai cabinet yesterday approved the construction of a third runway at Suvarnabhumi International Airport as part of the country’s ambition to become the aviation hub of ASEAN.

The 21.7 billion baht project will increase the combined capacity of Suvarnabhumi international airport’s runways to 94 arrivals and departures per hour from the current 64, said Lt-Gen Weerachon Sukonthapatipak, deputy government spokesman.

Suvarnabhumi Airport (aka. BKK) was opened in 2006 as Bangkok’s second airport. Initially it replaced the tired Don Mueang Airport but Don Mueang was later revamped as a low-coast airport to service the growing traffic demands.

Meanwhile Suvarnabhumi Airport was, and still is, operating above its designed capacity. An earlier bid to build a third terminal has been mired in controversy and is currently shelved pending a new brief from Airports of Thailand with a new round of design bids called for in the future.

Third runway for Suvarnabhumi Airport | News by The Thaiger

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Bangkok

Thai suki restaurant customer injured as gas cooker explodes

Tanutam Thawan

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Thai suki restaurant customer injured as gas cooker explodes | The Thaiger

PHOTO: Facebook.com/สมพงษ์ เเก้วอาจ

A gas canister has exploded at a Moo Katha or ‘suki’  restaurant in the Ram Inthra area of Bangkok. Moo Katha is a very popular kind of restaurant around the country.

Thai Rath reports that Sompong Kaew-art posted on his Facebook that he had been near the restaurant when he heard an explosion. Passersby first thought a tyre had blown out somewhere. But later they found out that a gas canister, used to heat the pan on the table, had exploded.

Poh Teck Tung foundation medics treated a woman at the scene before taking her to hospital. His Facebook post has since been read 40,000 times with 27,000 comments as Thais warned their friends about the exploding gas canister at the restaurants.

SOURCE: Thai Rath

Thai suki restaurant customer injured as gas cooker explodes | News by The Thaiger Thai suki restaurant customer injured as gas cooker explodes | News by The Thaiger

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Bangkok

Junta warned to be careful targeting rivals with petty litigation

The Thaiger & The Nation

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Junta warned to be careful targeting rivals with petty litigation | The Thaiger

PHOTO: Piyabutr Sangkanokkul reports to police yesterday using the, now popular, anti-government three-finger salute – The Nation

by Kai Chanwanpen

While members of pro-democracy parties continue to be targeted with politically-motivated lawsuits, a political scientist is warning this tactic of eliminating political rivals through trivial matters of law could backfire and lead to a legitimacy crisis down the track.

In the latest case, the Future Forward Party secretary-general Piyabutr Sangkanokkul yesterday acknowledged the charges pressed against him by the ruling NCPO, whose chief is a prime ministerial candidate after the March 24 election.

“Seeking advantage over rivals is common in politics. But this cannot be without consequences. They could face questions of legitimacy even if they successfully conspire to attain their goal,” said Attasit Pankaew, a political expert from Thammasat University.

“All the unfairness that can be seen right now will lead people to question if Piyabutr would have been hit with a lawsuit if he were not so popular in the election.”

The pro- and anti-junta blocs have been going after each other since the election with politically motivated, and mostly relatively petty, lawsuits.

But when the court was petitioned to seek the disqualification of junta chief Prayut Chan-o-cha as a prime ministerial candidate because he was a public servant, the ruling went in favour of the incumbent.

While these kinds of political challenges are common around the world, Attasit said that public sentiment could play a major role in making any change.

“It’s how the public responds to the treatment that could improve this culture,” he said.

“Meanwhile, the authority has to provide an explanation and ensure that the due process of law is followed without victimising political rivals.”

Piyabutr has been charged with contempt of court and breaching the computer crime law for reading out a statement in relation to the dissolution of Thai Raksa Chart Party in February.

Piyabutr, a former law lecturer at Thammasat University, yesterday denied the charges. He insisted on his innocence, saying as a law scholar the criticism was meant as an academic comment and that he believed in the justice system.

“The chief of the NCPO is the PM candidate of a political party, which was a rival of Future Forward Party in the election and he has assigned an official to prosecute me for contempt of court,” he said.

“Let me make an observation: the judicial branch is a part of the sovereign state and cannot escape criticism, especially the Constitutional Court which rules on political conflicts and whose judgement is likely to be scrutinised,” Piyabutr told reporters.

“Disagreement with a court judgement is not a crime.”

SOURCE: The Nation

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